Namma Kalvi

www.nammakalvi.in

XII- COMMERCE

STUDY NOTES (2019-20)

AADARSH COMMERCE GUIDE

Authored by: D.CHITHAMBARARAJ MBA, M.COM, B.ED. MO: 9994154393

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CHAPTER 1: PRINCIPLES OF MANAGEMENT
1
I .VERY SHORT ANSWER QUESTIONS:
1. What is Management?
 Management is goal oriented and it is an art of getting things done with and through others.
 The practice of management helps to achieve the organizational mission and determines the future of
the business enterprises.
2. List out the management tools.
 Tools of management have been developed such as, accounting, business law, psychology, statistics,
econometrics, data processing, etc.
 These branches of management profession have enhanced the practical utility of the science of
management.
3. Who is a manager?
 According to P. Drucker, the manager has to balance and integrate three major jobs of a business
enterprise as mentioned below
(i) Managing a business;
(ii) Managing manager; and
(iii) Managing workers and work.
 A manager is a dynamic and life-giving element in every business.
4. State the meaning of Authority.
 Authority means the right of a superior to give the order to his subordinates
5. What do you mean by Span of management?
 The Span of Management refers to the number of subordinates who can be managed efficiently by a
superior.

II. SHORT ANSWER QUESTIONS:

1. Define the term management.
“Management is a multipurpose organ that manages a business and manages manager, and manages
worker and work.” — Peter F. Drucker
“To manage is to forecast, to plan, to organise, to command, to co-ordinate and to control.”
—Henry Fayol.
2. Is management an Art or Science?
 Management is neither a science nor an art
 But a combination of both requiring people holding managerial positions to apply the scientific
management principles and displaying popular managerial skills to accomplish the organizational goals as
efficiently and as quickly as possible so as to be competitive in the globalized environment of business.
3. Differentiate management from Administration.
BASIS FOR COMPARISON MANAGEMENT ADMINISTRATION
Meaning An organized way of managing The process of administering an
people and things of a business organization by a group of
organization is called the people is known as the
Management Administration.
Authority Middle and Lower Level Top Level
Role Executive Decisive
Concerned with Policy Implementation Policy Formulation

4. What are the principles of Taylor?

Principles of scientific management propounded by Taylor are
1. Science, Not Rule of Thumb
2. Harmony, Not Discord
3. Mental Revolution
4. Cooperation, Not Individualism
5. Development of each and every person to his or her greatest efficiency and prosperity.
D.Chithambararaj
PGT Commerce
5. What determines the span of management?
2
The Span of Management refers to the number of subordinates who can be managed efficiently by a superior.
The Span of Management has two implications:
1. Influences the complexities of the individual manager‘s job
2. Determine the shape or configuration of the Organization

III. Long answer questions:

1. Write about the contribution of Drucker to management.
Drucker stresses three jobs of management:
(i) Managing a business;
(ii) Managing manager; and
(iii) Managing workers and work.
Even if one is omitted, It would not have management anymore and it also would not have a business
enterprise or an industrial society.
According to P. Drucker, the manager has to balance and integrate three major jobs of a business enterprise
as mentioned above. Hence, a manager is a dynamic and life giving element in every business. Without efficient
management it cannot be secure the best allocation and utilisation of human, material and financial resources.

2. Explain the management process in detail.

1. Management is Co-Ordination:
The manager of an enterprise must effectively coordinate all activities and resources of the organisation, namely,
men, machines, materials and money the four M‘s of management.
2. Management is a Process:
The manager achieves proper coordination of resources by means of the managerial functions of planning,
organising, staffing, directing (or leading and motivating) and controlling.
3. Management is a Purposive Process:
It is directed toward the achievement of predetermined goals or objectives. Without an objective, we have no
destination to reach or a path to follow to arrive at our destination, i.e., a goal, both management and
organisation must be purposive or goal-oriented.
4. Management is a Social Process:
It is the art of getting things done through other people.
5. Management is a Cyclical Process:
It represents planning-action-control-re planning cycle, i.e., an ongoing process to attain the planned goals.

3. Describe the principles of scientific management.

Mr.Frederick Winslow Taylor (F.W.Taylor) brought about a scientific approach.
1.Science, Not Rule of Thumb:
 Rule of Thumb means decisions taken by manager as per their personal judgments.
 According to Taylor, even a small production activity like loading iron sheets into box cars can be
scientifically planned.
 This principle is concerned with selecting the best way of performing a job through the application of
scientific analysis and not by intuition or hit and trial methods.
2.Harmony, Not Discord:
 Taylor emphasized that there should be complete harmony between the workers and the management
 Both the management and the workers should realize the importance of each other.
 Management should always be ready to share the gains of the company with the workers and the latter
should provide their full cooperation and hard work for achieving organizational goals.
3.Mental Revolution:
 Management as well as the workers should aim to increase the profits of the organisation.
 workers should put in their best efforts so that the company makes profit and on the other hand
management should share part of profits with the workers.
 Thus, mental revolution requires a complete change in the outlook of both management and workers.

D.Chithambararaj
PGT Commerce
 www.nammakalvi.in
4. Cooperation, Not Individualism:
3
 Cooperation, mutual confidence, sense of goodwill should prevail among both, managers as well as
workers.
 Workers should be considered as part of management and should be allowed to take part in decision
making process of the management.
 workers should also resist from going on strike or making unnecessary demands from management.
5. Development of each and every person to his or her greatest efficiency and prosperity:
 Efficiency of any organisation also depends on the skills and capabilities of its employees to a great
extent.
 To attain the efficiency, steps should be taken right from the process of selection of employees.
 The work assigned to each employee should suit his/her physical, mental and intellectual capabilities.
 This ultimately helps to attain efficiency and prosperity for both organisation and the employees.

4.Explain the principles of modern management.

The Father of Modern Management is Mr.Henry Fayol, and according to him there are 14 major
principles of management.
1. Division of Work: According to this principle the whole work is divided into small tasks. It leads to
specialization which increases the efficiency of labour.
2. Authority and Responsibility: Authority means the right of a superior to give the order to his
subordinates whereas responsibility means obligation for performance.
3. Discipline: It is obedience, proper conduct in relation to others, respect of authority, etc. It is essential for
the smooth functioning of all organizations.
4. Unity of Command: This principle states that each subordinate should receive orders and be accountable
to one and only one superior. If an employee receives orders from more than one superior, it is likely to
create confusion and conflict.
5. Unity of Direction: All related activities should be put under one group, there should be one plan of
action for them, and they should be under the control of one manager.
6. Subordination of Individual Interest to Mutual Interest: The management must put aside personal
considerations and put company objectives firstly. Therefore the interests of goals of the organization
must prevail over the personal interests of individuals.
7. Remuneration: Workers must be paid sufficiently as this is a chief motivation of employees and therefore
greatly influences productivity.
8. The Degree of Centralization: Centralization implies the concentration of decision making authority at
the top management, it depends on company size.
9. Line of Authority/Scalar Chain: The principle suggests that there should be a clear line of authority from
top to bottom linking all managers at all levels.
10. Order: Social order ensures the fluid operation of a company through authoritative procedure. Material
order ensures safety and efficiency in the workplace. Order should be acceptable and under the rules of
the company.
11. Equity: Employees must be treated kindly. Managers should be fair and impartial when dealing with
employees, giving equal attention towards all employees.
12. Stability of Tenure of Personnel: Stability of tenure of personnel is a principle stating that in order for an
organization to run smoothly, personnel (especially managerial personnel) must not frequently enter and
exit the organization.
13. Initiative: Using the initiative of employees can add strength and new ideas to an organization. Initiative
on the part of employees is a source of strength for organization because it provides new and better
ideas.
14. Esprit de Corps/Team Spirit: This refers to the need of managers to ensure and develop morale in the
workplace; individually and communally. Team spirit helps develop an atmosphere of mutual trust and
understanding. Team spirit helps to finish the task on time.

D.Chithambararaj
PGT Commerce
 4. Discuss the implications of span of management
4
The Span of Management has two implications:
1. Influences the complexities of the individual manager‘s job
2. Determine the shape or configuration of the Organization
 There is a wide and a narrow span of management.
Wide Span of Management:
 there will be less hierarchical levels, and thus, the organizational structure would be flatter
 It will be very difficult for a superior to manage a large number of subordinates at a time and also may
not listen to all efficiently.
 Number of managers gets reduced in the hierarchy, and thus, the expense in terms of remuneration is
saved.
 The subordinates feel relaxed and develop their independent spirits in a free work environment, where
the strict supervision is absent.
Narrow span of Management:
 The hierarchical levels increases, hence the organizational structure would be tall and more challenges.
 Less number of subordinates under one superior, requires more managers to be employed in the
organization.
 It would be very expensive in terms of the salaries to be paid to each senior.
 Communication suffers drastically.
 Lack of coordination and control because the operating staff is far away from the top management.
 Cross communication gets facilitated, i.e., operative staff communicating with the top management. Also,
the chance of promotion increases with the availability of several job positions.

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All the Best!

D.Chithambararaj
PGT Commerce
Chapter 2: FUNCTIONS OF MANAGEMENT:
5
I. Very Short Answer Questions:
1. Write a short note about Planning.
 Planning is the primary function of management. Nothing can be performed without planning.
 Planning refers to deciding in advance. Planning should take place before doing.
2. What is meant by Motivation?
 It is the process of stimulating people to actions to accomplish the goal.
 Motivation includes increasing the speed of performance of a work and developing a willingness on the
part of workers.
3. What is meant by Controlling?
 It is the control function which facilitates synchronization of actual performance with predetermined
standards.
 Controlling is performed to evaluate the performance of employees and deciding increments and
promotion decisions.
4. How do you coordinate your classroom with peace?
Peace starts with each individual, and the way you act affects the world around you." Allow the children to
respond. Express your interest in getting to know each student and your willingness to be there for them if they
have a problem. You might say something like: "I want us to have a great year together.
5. What is meant by Innovation?
 Innovation refers to the preparation of personnel and organisation to face the changes made in the
business world.
 Innovation includes developing new material, new products, new techniques in production, new package,
and new design of a product and cost reduction.

II. Short Answer Questions:

1. List out the main functions of management?
 Planning
 Organizing
 Staffing
 Directing
 Motivating
 Controlling
 Coordination
2. State the importance of staffing.
 Staffing refers to placement of right persons in the right jobs.
 The success of any enterprise depends upon the successful performance of staffing function.
 Staffing helps to ensure better utilization of human resources.
 It ensures the continuity and growth of the organization, through development managers.
3. Bring out the subsidiary functions of management.
 Innovation- Innovation refers to the preparation of personnel and organisation to face the changes made
in the business world.
 Representation- A manager has to act as representative of a company. It is the duty of every manager to
have good relation with others
 Decision making- Decision making helps in the smooth functioning of an organisation.
 Communication- Communication is the transmission of human thoughts, views or opinions from one
person to another person.
4. State the importance of Motivation.
 Mainly because it allows management to meet the company's goals.
 Motivated employees can lead to increased productivity and allow an organisation to achieve
higher levels of output.
 Motivation is an important factor which brings employees satisfaction.

D.Chithambararaj
PGT Commerce
 www.nammakalvi.in
5. What are the main duties of a manager?
6
 The primary role of a manager is to ensure the daily functioning of a department or group of
employees.
 Most employers expect their managers to interview, hire, and train new employees.
 A manager articulates both short and long-term goals to ensure a company’s longevity.
 Managers complete administrative work and correspond with other departments.

III. Long Answer Questions:

1. Explain the various functions of management.
Main Functions:
1. Planning: Planning is the primary function of management. Nothing can be performed without planning.
Planning refers to deciding in advance. Planning should take place before doing.
2. Organising: Organising is the process of establishing harmonious relationship among the members of an
organisation and the creation of network of relationship among them.
3. Staffing: staffing refers to placement of right persons in the right jobs. The success of any enterprise
depends upon the successful performance of staffing function
4. Directing: Directing denotes motivating, leading, guiding and communicating with subordinates on an
ongoing basis in order to accomplish pre-set goals.
5. Motivating: It is the process of stimulating people to actions to accomplish the goal.
Motivation includes increasing the speed of performance of a work and developing a willingness on the
part of workers.
6. Controlling: It is the control function which facilitates synchronization of actual performance with
predetermined standards.
7. Co ordination: Co-ordination is the synchronization of the actions of all individuals, working in the
enterprise in different capacities.
Subsidiary Functions:
1. Innovation: Innovation refers to the preparation of personnel and organisation to face the changes made
in the business world.
2. Representation: A manager has to act as representative of a company. It is the duty of every manager to
have good relation with others.
3. Decision-making: Every employee of an organisation has to take a number of decisions every day.
Decision making helps in the smooth functioning of an organization.
4. Communication: Communication is the transmission of human thoughts, views or opinions from one
person to another person.

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Hard work never fails.

D.Chithambararaj
PGT Commerce
 7
Chapter 3: MANAGEMENT PROCESS:
I. Very Short Answer Questions:
1. Define - MBO
Prof. Reddin defines MBO as, “the establishment of effective standards for managerial positions and the periodic
conversion of those into measurable time bound objectives linked vertically and horizontally and with future
planning.
2. What are the objectives of MBO?
 To measure and judge performance
 To relate individual performance to organisational goals
 To clarify both the job to be done and the expectations of accomplishment
 To enhance communications between superiors and subordinates
3. Bring out the meaning of MBE.
 Management by exception is a style of business management that focuses on identifying and handling
cases that deviate from the norm.
 Management by exception is the practice of examining the financial and operational results of a business,
and only bringing issues to the attention of management if results represent substantial differences from
the budgeted or expected amount.
4. Mention any two advantages of MBO?
 MBO process helps the managers to understand their role in the total organisation.
 Manager recognises the need for planning and appreciates the planning.
 Systematic evaluation of performance is made with the help of MBO
5. Write any two importance of MBE.
 It saves the time of managers because they deal only with exceptional matters. Routine problems are left
to subordinates.
 It focuses managerial attention on major problems. As a result, there is better utilisation of managerial
talents and energy
6. What is known as KRA?
 Key result areas are fixed on the basis of organisational objectives premises.
 Key Result Areas (KRA) are arranged on a priority basis.
 KRA indicates the strength of an organisation.
 The examples of KRA are profitability, market standing, innovation etc.

II. Short Answer Questions:

1. Write the features of MBO.
 MBO tries to combine the long run goals of organisation with short run goals.
 Management tries to relate the organisation goals with society goals.
 MBO’s emphasis is not only on goals but also on effective performance.
 A high degree of motivation and satisfaction is available to employees through MBO.
 Recognizes the participation of employees in goal setting process.
2. What are the process involved in MBO?
 Defining Organisational Objectives
 Goals of Each Section
 Fixing Key Result Areas
 Setting Subordinate Objectives or Targets
 Matching Resources with Objective
 Periodical Review Meetings
 Appraisal of Activities
 Reappraisal of Objectives

D.Chithambararaj
PGT Commerce
3. What are the Process of MBE?
8
 Primarily, it is necessary to set objectives or norms with predictable or estimated results. These
performances are assessed and get equated to the actual performance.
 Next, the deviation gets analysed. With an insignificant or no deviation, no action is required and senior
managers can concentrate on other matters.
 If actual performances deviates significantly, the issue needs to be passed to the senior managers, as an
“exception has occurred”. Finally, the aim is to solve this “exception” immediately.
4. List out any Four process of MBO.
1. Defining Organisational Objectives
2. Goals of Each Section
3. Fixing Key Result Areas
4. Setting Subordinate Objectives or Targets

III. Long Answer Questions:

1. What are the major advantages of MBO?
 MBO process helps the managers to understand their role in the total organisation.
 Manager recognises the need for planning and appreciates the planning.
 MBO provides a foundation for participative management. Sub-ordinates are also involved in goal setting.
 Systematic evaluation of performance is made with the help of MBO.
 MBO gives the criteria of performance. It helps to take corrective action.
 Delegation of authority is easily done with the help of MBO.
 MBO motivates the workers by job enrichment and makes the jobs meaningful.
 The responsibility of a worker is fixed through MBO.
2. What are the advantages of MBE?
1. It saves the time of managers because they deal only with exceptional matters. Routine problems are
left to subordinates.
2. It focuses managerial attention on major problems. As a result, there is better utilisation of managerial
talents and energy
3. It facilitates delegation of authority. Top management concentrates on strategic decisions and
operational decisions are left to the lower levels.
4. It is a technique of separating important information from unimportant one.
5. MBE keeps management alert to opportunities and threats by identifying critical problems. It can avoid
uninformed and impulsive action.
6. Management by exception provides better yardsticks for judging results. It is helpful in objective
performance appraisal.
3. Explain the various disadvantages of MBO.
1. MBO fails to explain the philosophy; most of the executives do not know how MBO works? what is
MBO? and why is MBO necessary? and how participants can benefit by MBO?
2. MBO is a time consuming process. Much time is needed by senior people for framing the MBO. Next,it
leads to heavy expenditure and also requires heavy paper work.
3. MBO emphasises only on short-term objectives and does not consider the longterm objectives.
4. The status of subordinates is necessary for proper objectives setting. But, this is not possible in the
process of MBO.
5. MBO is rigid one. Objectives should be changed according to the changed circumstances, external or
internal. If it is not done, the planned results cannot be obtained.
4. Discuss the disadvantages of MBE
i. The main disadvantage of MBE is, only managers have the power over really important decisions, which
can be demotivating for employees at a lower level.
ii. Furthermore, it takes time to pass the issues to managers. Managing employees who deviate from the
normal procedures. Because of compliance failures are considered difficult to manage and typically find
themselves with limited job duties and ultimately dismissed/terminated.
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D.Chithambararaj
PGT Commerce
 www.nammakalvi.in
9
Chapter 4: FINANCIAL MARKETS:
I. Very Short Answer Questions:
1. What are the components of organized sectors?
Organized sector consist of,
i.Regulators ii. Financial Institutions iii. Financial Markets and Financial Services
2. Write a note on financial market.
A market wherein financial instruments such as financial claims, assets and securities are traded is known
as a ‘financial market.
3. What is equity market?
 It is the financial market for trading in Equity Shares of Companies
 An equity market is a market in which shares are issued and traded, either through exchanges or over-
the-counter markets.
4. What is debt market?
 It is the financial market for trading in Debt Instrument (i.e. Government Bonds or Securities, Corporate
Debentures or Bonds)
5. How is prize decided in a secondary market?
Prices in the secondary market are determined by the basic forces of supply and demand. If the majority
of investors believe a stock will increase in value and rush to buy it, the stock's price will typically rise.

II. Short Answer Questions:

1. Give the meaning and definition of financial market.
Meaning:
A market wherein financial instruments such as financial claims, assets and securities are traded is known
as a ‘financial market’.
According to Brigham, Eugene F, “The place where people and organizations wanting to borrow money
are brought together with those having surplus funds is called a financial market.”
2. Differentiate spot market from future market.
(i) Cash/Spot Market is a market where the delivery of the financial instrument and payment of cash
occurs immediately. i.e. settlement is completed immediately.
(ii) Forward or Futures Market is a market where the delivery of asset and payment of cash takes place at
a pre-determined time frame in future.
3. Write a note on Secondary Market.
 The place where formerly issued securities are traded is known as Secondary Market.(Resale
Market)
 Secondary Market is the market for securities that are already issued. Stock Exchange is an
important institution in the secondary market.
 It does not provide funding to companies
4. Bring out the scope of financial market in india.
 The financial market provides financial assistance to individuals, agricultural sectors, industrial sectors,
service sectors, financial institutions like banks, insurance sectors, provident funds and the government
as a whole.
 With the help of the financial market all the above stated individuals, institutions and the Government
can get their required funds in time.
 Through the financial market the institutions get their short term as well as long term financial assistance.
It leads to the overall economic development.

D.Chithambararaj
PGT Commerce
 10
III. Long Answer Questions:

1. Distinguish between new issue market and secondary market.

BASIS FOR COMPARISON NEW ISSUE MARKET SECONDARY MARKET

Meaning The market place for new shares is The place where formerly issued
called primary market. (Initial Issues securities are traded is known as
Market) Secondary Market. (Resale Market)
Buying Direct Indirect
Gained person Company Investors
Intermediary Underwriters Brokers
Buying and Selling between Company and Investors Investors
How can securities be sold? Only Once Multiple times
Organizational Not rooted to any specific spot or It has physical existence
difference geographical location
2. Enumerate the different kinds of financial markets or discuss the various types of financial markets
a. On the Basis of Type of Financial Claim
(i) Debt Market is the financial market for trading in Debt Instrument (i.e. Government Bonds or Securities,
Corporate Debentures or Bonds)
(ii) Equity Market is the financial market for trading in Equity Shares of Companies.
b. On the Basis of Maturity of Financial Claim
(i) Money Market is the market for short term financial claim (usually one year or less) E.g. Treasury Bills,
Commercial Paper, Certificates of Deposit
(ii) Capital Market is the market for long term financial claim more than a year E.g. Shares, Debentures
C. On the Basis of Time of Issue of Financial Claim
(i) Primary Market is a term used to include all the institutions that are involved in the sale of securities for the
first time by the issuers (companies). Here the money from investors goes directly to the issuers.
(ii) Secondary Market is the market for securities that are already issued. Stock Exchange is an important
institution in the secondary market.
d. On the Basis of Timing of Delivery of Financial Claim
(i) Cash/Spot Market is a market where the delivery of the financial instrument and payment of cash occurs
immediately. i.e. settlement is completed immediately.
(ii) Forward or Futures Market is a market where the delivery of asset and payment of cash takes place at a pre-
determined time frame in future.
e. On the Basis of the Organizational Structure of the Financial Market
(i) Exchange Traded Market is a centralized organization (stock exchange) with standardized procedures.
(ii) Over–the–Counter Market is a decentralized market (outside the stock exchange) with customized
procedures.
The above classification is not rigid. One market may come under more than one category.

3. Discuss the role of financial market.

(i) Savings Mobilization:
Obtaining funds from the savers or ‘surplus’ units such as household individuals, business firms, public
sector units, Government is an important role played by financial markets.
(ii) Investment :
Financial market plays a key role in arranging the investment of funds thus collected, in those units which
are in need of the same.
(iii) National Growth
Financial markets contribute to a nation’s growth by ensuring an unfettered flow of surplus funds to
deficit units. Flow of funds for productive purposes is also made possible. It leads to overall economic growth.

D.Chithambararaj
PGT Commerce
(iv) Entrepreneurship Growth
11
Financial markets contribute to the development of the entrepreneurial class by making available the
necessary financial resources.
(v) Industrial Development
The different components of financial markets help an accelerated growth of industrial and economic
development of a country and thus contributing to raising the standard of living and the society’s well-being

4. What are the functions of Financial Markets?

I. INTERMEDIARY FUNCTIONS:
(i) Transfer of Resources:
Financial markets facilitate the transfer of real economic resource from lenders to ultimate borrowers.
(ii) Enhancing Income:
Financial markets allow lenders earn interest/dividend on their surplus investible funds and thus contributing to
the enhancement of the individual and the national income.
(iii) Productive Usage:
Financial markets allow for the productive use of the funds borrowed and thus enhancing the income and the
gross national production.
(iv) Capital Formation:
Financial markets provide a channel through which new savings flow to aid capital formation of a country.
v) Price Determination:
Financial markets allow for the determination of the price of the traded financial asset through the interaction of
buyers and sellers. They provide a signal for the allocation of funds in the economy, based on the demand and
supply, through the mechanism called price discovery processes.
(vi) Sale Mechanism:
Financial market provides a mechanism for selling of a financial asset by an investor so as to offer the benefits of
marketability and liquidity of such assets.
(vii) Information:
The activities of the participants in the financial market result in the generation and the consequent
dissemination of information to the various segments of the markets, so as to reduce the cost of transaction of
financial assets.
II THE FINANCIAL FUNCTIONS:
(i) Providing the borrowers with funds so as to enable them to carry out their investment plans
(ii) Providing the lenders with earning assets so as to enable them to earn wealth by deploying the assets
in productive ventures
(iii) Providing liquidity in the market so as to facilitate trading of funds.

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D.Chithambararaj
PGT Commerce
 www.nammakalvi.in
Chapter 5: CAPITAL MARKET
12
I. Very Short Answer Questions:
1. What is Capital Market?
 Capital market is a market where buyers and sellers engage in trade of financial securities like bonds, and
stocks.
 The buying/selling is undertaken by participants such as individuals and institutions.
2. Write a note on OTCEI.
 The OTCEI was set up by a premier financial institution to allow the trading of securities across the
electronic counters throughout the country.
 It addresses some specific problems of both investors and medium-size companies.
3. What is Mutual Fund?
 Financial institutions that provide facilities for channeling savings of small investors into avenues of
productive investments are called ‘Mutual Funds’.
 A mutual fund company invests the funds pooled from shareholders and gives them the benefit of
diversified investment portfolio and a reasonable return.
4. Who are the participants in a Capital Market?
There are many players in the capital market. The participants of the capital market include individuals,
corporate sectors, Govt., banks and other financial institutions..
5. How is price determined in a Capital Market?
After a company goes public and starts trading on the exchange, its price is determined by supply and
demand for its shares in the market.

II. Short Answer Questions:

1. What are the various kinds of Capital Market? Explain.
I Primary Market:
Primary market is a market for new issues or new financial claims. Hence, it is also called New Issue
Market.
II Secondary Market:
Secondary Market may be defined as the market for old securities, in the sense that securities which are
previously issued in the primary market are traded here. The trading takes place between investors.

2. Explain any two functions of Capital Market.

(i) Savings and Capital Formation:
In capital market, various types of securities help to mobilize savings from various sectors of population
(Individuals, Corporate, Govt., etc.)
(ii) Reliable Guide to Performance:
The capital market serves as a reliable guide to the performance and financial position of corporate, and thereby
promotes efficiency.
3. Write a note on National Clearance and Depository System (NCDS).
Under the scripless trading system, settlement of transactions relating to securities takes place through a book
entry.
 Its prescribes the terms and conditions of contract for the securities market
 Its aims at determining the net cash and stock liability of each broker on a settlement date
 Its arranges to provide for the transfer of ownership of securities in exchange on payment by book entry
on electronic ledgers without any physical movement of transfer deed
4. Discuss about evolution and growth of Indian Capital Market.
 The period between 1947 and 1973 marked the development of infrastructure for capital market
 During this period, a network of development financial institutions such as IFCI, ICICI, IDBI and UTI, SFCs
and SIDCs were established.
 These financial institutions strengthened the capital market.
 During the period between 1980 and 1992, debenture emerged as a powerful instrument of resource
mobilization in the primary market.

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PGT Commerce
  A number of stock exchanges came into existence. There was a momentous growth in the secondary
13
market.
 SEBI emerged as an effective regulatory body for the primary and secondary markets and afford a
measure of protection to small investors.
5. Explain about Factoring and Venture Capital Institutions.
(i) Factoring Institutions:
“Factoring” is an arrangement whereby a financial institution provides financial accommodation on the
basis of assignment/ sale of account receivables. The factoring institutions collect the book debts for and on
behalf of its clients.
(ii) Venture Fund Institutions:
 Venture capital financing is a form of equity financing designed especially for funding new and innovative
project ideas.
 Venture capital funds bring into force the hi-technology projects which are converted into commercial
production.

III. Long Answer Questions:

1. Discuss the characters of a Capital Market.
(i) Securities Market:
The dealings in a capital market are done through the securities like shares, debentures, etc. The capital market
is thus called securities market.
(ii) Price:
The price of the securities is determined based on the demand and supply prevailing in the capital market for
securities.
(iii) Participants:
There are many players in the capital market. The participants of the capital market include individuals,
corporate sectors, Govt., banks and other financial institutions.
(iv) Location :
Capital market is not confined to certain specific locations, although it is true that parts of the market are
concentrated in certain well known centers known as Stock Exchanges.
(v) Market for Financial Assets:
Capital market provides a transaction platform for long term financial assets

2. Briefly explain the functions of capital market.

(i) Savings and Capital Formation:
In capital market, various types of securities help to mobilize savings from various sectors of population
(Individuals, Corporate, Govt., etc.) This accelerates the capital formation in the country.
(ii) Permanent Capital:
 The existence of a capital market/stock exchange enables companies to raise permanent capital.
 The stock exchange resolves this dash of interests by offering an opportunity to investors to buy or sell
their securities, while permanent capital with the company remains unaffected.
(iii) Industrial Growth:
The stock exchange is a central market through which resources are transferred to the industrial sector of
the economy
(iv) Ready and Continuous Market:
 The stock exchange provides a central convenient place where buyers and sellers can easily purchase and
sell securities.
 Easy marketability makes investment in securities more liquid as compared to other assets.
(v) Reliable Guide to Performance:
The capital market serves as a reliable guide to the performance and financial position of corporate, and
thereby promotes efficiency.

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PGT Commerce
(vi) Proper Channelization of Funds:
14
The prevailing market price of a security and relative yield are the guiding factors for the people to
channelize their funds in a particular company. This ensures effective utilisation of funds in the public interest.
vii) Development of Backward Areas:
Capital Markets provide funds for projects in backward areas. This facilitates economic development of
backward areas. Long term funds are also provided for development projects in backward and rural areas.
(viii) Easy Liquidity:
With the help of secondary market investors can sell off their holdings and convert them into liquid cash.
Commercial banks also allow investors to withdraw their deposits, as and when they are in need of funds.

3. Explain the various types of New Financial Institutions

(i) Venture Fund Institutions:
Venture capital financing is a form of equity financing designed especially for funding new and innovative
project ideas. Venture capital funds bring into force the hi-technology projects which are converted into
commercial production.
(ii) Mutual Funds:
Financial institutions that provide facilities for channeling savings of small investors into avenues of
productive investments are called ‘Mutual Funds’.
(iii) Factoring Institutions:
“Factoring” is an arrangement whereby a financial institution provides financial accommodation on the
basis of assignment/ sale of account receivables. The factoring institutions collect the book debts for and on
behalf of its clients.
(iv) Over the Counter Exchange of India (OTCEI):
The OTCEI was set up by a premier financial institution to allow the trading of securities across the
electronic counters throughout the country. It addresses some specific problems of both investors and medium-
size companies.
(v) National Stock Exchange of India Limited (NSEI):
NSEI was established in 1992 to function as a model stock exchange. The Exchange aims at providing the
advantage of nationwide electronic screen based “scripless” and “floorless” trading system in securities.
(vi) National Clearance and Depository System (NCDS):
Under the scripless trading system, settlement of transactions relating to securities takes place through a
book entry.
(vii) National Securities Depositories Limited:
The NSDL was set up in the year 1996 for achieving a time bound dematerialization as well as
rematerialization of shares.
viii) Stock Holding Corporation of India Limited (SHCIL):
Stock Holding Corporation of India Limited (SHCIL) aims at serving as a central securities depository in
respect of transactions on stock exchanges.

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D.Chithambararaj
PGT Commerce
 www.nammakalvi.in
15
Chapter 6: MONEY MARKET

I. Very Short Answer Questions:

1. Define the term “Money Market”.
According to Crowther, ”the money market is the collective name given to the various firms and
institutions that deal in the various grades of near money”.
2. What is commercial bill market?
A bill of exchange issued by a commercial organization to raise money for short- term needs. These bills
are of 30 days, 60 days and 90 days maturity.
3. What is a CD market?
 Certificate of Deposits are short-term deposit instruments issued by banks and financial
institutions to raise large sums of money.
 Certificate of Deposits are issued in the form of usance promissory notes.
4. What is Government Securities Market?
A market whereby the Government or gilt-edged securities can be bought and sold is called ‘Government
Securities Market’.
5. What are the Instruments of Money Market?
 Treasury Bills
 Commercial Bills
 Certificate of Deposits
 Government Securities
6. Explain the two oldest money markets.
Treasury bill:
A Treasury bill is nothing but a promissory note issued for a specified period stated therein. The
Government promises to pay the specified amount mentioned therein to the bearer of the instrument on the
due date. The period does not exceed a period of one year.
Commercial Bills:
A bill of exchange issued by a commercial organization to raise money for short- term needs. These bills
are of 30 days, 60 days and 90 days maturity.
7. What do you meant by Auctioning?
A method of trading whereby merchants bid against one another and where the securities are sold to the
highest bidder is known as ‘auctioning’.
8. What do you meant by Switching?
The purchase of one security against the sale of another security carried out by the RBI in the secondary
market as part of its open market operations is described as ‘Switching’.

II. Short Answer Questions:

1. What are the features of Treasury Bills?
Treasury Bills incorporate the following general features.
1.Issuer
2.Finance Bills
3.Liquidity
4.Vital Source
5.Monetary Management
2. Who are the participants of Money Market?
There are many participants operating in the Money Market. The participants deal with the money market
instruments like Treasury Bills, Commercial Bills, Commercial Papers, etc.,
1.Government of different countries 2.Central Banks of different countries
3.Private and Public Banks 4.Mutual Funds Institutions
5.Insurance Companies 6.Non-Banking Financial Institutions
7.RBI and SBI
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PGT Commerce
 16
3. Explain the types of Treasury Bills?
Treasury Bills may be classified into three. They are:
1)91 days Treasury Bills : Its issued at a fixed discount rate of 4 per cent as well as through auctions.
2)182 days Treasury Bills: The RBI holds 91 days and 182 Treasury Bills and they are issued on tap basis
throughout the week.
3)364 days Treasury Bills: 364 days Treasury Bills do not carry any fixed rate. The discount rate on these bills are
quoted in auction by the participants and accepted by the authorities. Such a rate is called cut off rate.

4. What are the features of Certificate of Deposit?

 Document of title to time deposit
 It is unsecured negotiable instruments.
 It is freely transferable by endorsement and delivery.
 It is issued at discount to face value.
 It is repayable on a fixed date without grace days.

5. What are the types of Commercial Bill?

 Demand and Usance Bills
 Clean bills and documentary Bills
 Inland bills and Foreign Bills
 Indigeneous Bills
 Accommodation and supply Bills

III. Long Answer Questions:

1. Define Money Market and Capital Market. Explain the difference between the Money Market and Capital
Market.
Money Market:
According to Crowther, ”the money market is the collective name given to the various firms and institutions that
deal in the various grades of near money”.
Capital Market :
According to Arun K. Datta, capital market may be defined as “a complex of institutions investment and practices
with established links between the demand for and supply of different types of capital gains”.
SL.NO FEATURES MONEY MARKET CAPITAL MARKET
1 Duration of Funds It is a market for short-term loanable It is a market for long-term funds
funds for a period of not exceeding one exceeding period of one year.
year.
2 Deals with Instruments It deals with instruments like commercial It deals with instruments like
bills (bill of exchange, treasury bill, shares, debentures, Government
commercial papers etc.). bonds, etc.,
3 Role of Major The central bank and commercial banks Development banks and Insurance
Institution are the major institutions in the money companies play a dominant role in
market. the capital market.
4 Availability of Money Market instruments generally do Capital market instruments
Instruments not have secondary market. generally have secondary markets.

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PGT Commerce
5 Subdivision
6 Place of Transaction
7 Risk
8 Liquidity
In money market there is no such In capital market there is a division
17
subdivision. of primary market and secondary
market.
Transactions mostly take place over the Transactions take place at a formal
phone and there is no formal place. place. Eg. stock exchange.
Low credit and market risk. High credit and market risk
High liquidity in Money Market Low liquidity in Capital Market

2. Explain the characteristics of Money Market?

1.Short-term Funds
It is a market purely for short-term funds or financial assets called near money.
2.Maturity Period
It deals with financial assets having a maturity period upto one year only.
3.Conversion of Cash
It deals with only those assets which can be converted into cash readily without loss and with minimum
transaction cost.
4.Existence of Secondary Market
There should be an active secondary market for these instruments.
5.Demand and Supply of Funds
There should be a large demand and supply of short-term funds. It presupposes the existence of a large
domestic and foreign trade.
6.Wholesale Market
It is a wholesale market and the volume of funds or financial assets traded in the market is very large.
7.Flexibility
Due to greater flexibility in the regulatory framework, there are constant endeavours for introducing new
instruments.
8.No Formal Place
Generally, transactions take place through phone, i.e., oral communication.

3. Explain the Instruments of Money Market?

I.Treasury bill :
 A Treasury bill is nothing but a promissory note issued for a specified period stated therein.
 The Government promises to pay the specified amount mentioned therein to the bearer of the
instrument on the due date.
 The period does not exceed a period of one year
Features:
1.Issuer 2.Finance Bills 3.Liquidity 4.Vital Source 5.Monetary Management
Types:
On the basis of periodicity, Treasury Bills may be classified into three. They are:
1)91 days Treasury Bills
2)182 days Treasury Bills and 3)364 days Treasury Bills
II. Certificate of Deposits:
 Certificate of Deposits are short-term deposit instruments issued by banks and financial institutions to
raise large sums of money.
 Certificate of Deposits are issued in the form of usance promissory notes.
 The Certificate of Deposit is transferable from one party to another.

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PGT Commerce
 www.nammakalvi.in
18
Features of Certificate of Deposit
1. Document of title to time deposit
2. It is unsecured negotiable instruments.
3. It is freely transferable by endorsement and delivery.
4. It is issued at discount to face value.
5. It is repayable on a fixed date without grace days.
III. Commercial Bills:
A bill of exchange issued by a commercial organization to raise money for short- term needs. These bills
are of 30 days, 60 days and 90 days maturity.
Types of Commercial Bill:
 Demand and Usance Bills
 Clean bills and documentary Bills
 Inland bills and Foreign Bills
 Indigeneous Bills
 Accommodation and supply Bills

4. Explain the features and types of Commercial Bills?

Features
The features of the Commercial Bills are as follows:
1. Drawer
2. Acceptor
3. Payee
4. Discounter
5. Endorser
6. Assessment
7. Maturity
8. Credit Rating
Types
a. Demand and Usance Bills
A demand bill is one wherein no specific time of payment is mentioned. So, demand bills are payable
immediately when they are presented to the drawee.
b. Clean bills and documentary Bills
Bills that are accompanied by documents of title to goods are called documentary bills. Clean bills are
drawn without accompanying any document.
E.g. Railway Receipt and Lorry Receipt
c. Inland bills and Foreign Bills
Bills that are drawn and payable in India on a person who is resident in India are called inland bills. Bills that
are drawn outside India and are payable either in India or outside India are called foreign bills.
d. Indigeneous Bills
The drawing and acceptance of indigenous bills are governed by native custom or usage of trade.
e. Accommodation and supply Bills
Accommodation bills are those which do not arise out of genuine trade of transactions.

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PGT Commerce
 19

5. What are the features of Government Securities?

1. Agencies
Government securities are issued by agencies such as Central Government, State Governments, semi-
government authorities like local Government authorities, e.g. municipalities, autonomous institution such as
metropolitan authorities, port trusts etc.,
2. RBI Special Role
RBI takes a special and an active role in the purchase and sale of these securities as part of its monetary
management exercise.
3. Nature of Securities
Securities offer a safe avenue of investment through guaranteed payment of interest and repayment of
principal by the Government.
4. Liquidity Profile
The liquidity profile of gilt-edged securities varies. Accordingly liquidity profile of securities issued by
Central Government is high.
5. Issue Mechanism
The Public Debt Office (PDO) of the RBI undertakes to issue government securities.
6. Issue opening
A notification for the issue of the securities is made a few days before the public subscription is open.
7. Switching
The purchase of one security against the sale of another security carried out by the RBI in the secondary
market as part of its open market operations is described as ‘Switching’.
8. Auctioning
A method of trading whereby merchants bid against one another and where the securities are sold to the
highest bidder is known as ‘auctioning’.

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D.Chithambararaj
PGT Commerce
 20

Chapter 7: STOCK EXCHANGE

I. Very Short Answer Questions:
1. What is meant Stock Exchange?
 Stock Exchange is an organized market for the purchase and sale of industrial and financial security.
 Stock Exchange (also called Stock Market or Share Market) is one of the important constituents of Capital
market.
 It is an investment intermediary and facilitates economic and industrial development of a country.
2. Define Stock Exchange.
According to Husband and Dockerary, "Stock exchanges are privately organized markets which are used
to facilitate trading in securities."
3. Write any 5 Stock Exchanges in India.
 The Bombay Stock Exchange
 The National Stock Exchange of India (NSE) Ltd.
 The Coimbatore Stock Exchange Ltd.
 The Madras Stock Exchange Ltd
 Bangalore Stock Exchange Ltd.
4. What is meant by Remisier?
He acts as an agent of a member of a stock exchange. He obtains business for his principal ie., the
member and gets a commission for that service.
5. Who is called a Broker?
 Brokers are commission agents, who act as intermediaries between buyers and sellers of securities.
 They do not purchase or sell securities on their behalf. They bring together the buyers and sellers and
help them in making a deal.
 Brokers charge a commission from both the parties for their service.
6. What are the types of Speculator?
 Bull
 Bear
 Stag
 Lame Duck
7. What is meant by Commodity Exchange?
A commodity exchange is an exchange where commodities are traded. Tradable commodities fall into the
following categories.
 Metals (e.g. gold, silver,copper)
 Energy (e.g. crude oil, natural gas)
 Agricultural (e.g. rice, wheat, cocoa)
 Livestock and meat (e.g. live cattle, lean hog)
8. Mention the Recent Development in Stock Exchange?
The structure of stock market in India has undergone a vast change due to the liberalization process
initiated by the Government.
A number of new structures have been added to the existing structure of the Indian stock exchange.
1. National Stock Exchange of India Limited (NSE)
2. Stock Holding Corporation of India Limited (SHCIL)
3. National Clearing and Depository System (NCDS)
4. Securities Trading Corporation of India (STCI)
5. National Securities Depositary Limited (NSDL)
9. What is the stock trading time in India?
 The timing of both BSE & NSE is the same.
 Stock market in India is closed on weekends i.e. Saturday and Sunday.
 It is also closed on the national holidays.
 The normal trading time for equity market is between 9:15 a.m to 03:30 p.m, Monday to Friday.

D.Chithambararaj
PGT Commerce
 www.nammakalvi.in
10. Explain Dalal Street.
21
 Dalal Street is an area in downtown Mumbai, India, that houses the Bombay Stock Exchange (BSE) – the
largest stock exchange in India – and other reputable financial institutions.
 It received the name Dalal Street after the Bombay Stock Exchange moved to the area in 1874 and
became the first stock exchange recognized by the Indian Government.
 The literal translation of Dalal in Marathi is a broker or intermediary.
II. Short Answer Questions:
1. What are the limitations of Stock exchange?
i. Lack of uniformity and control of stock exchanges.
ii. Absence of restriction on the membership of stock exchanges.
iii. Failure to control unhealthy speculation.
iv. Allowing more than one charge in the place.
v. No proper regulation of listing of securities on the stock exchange
2. Explain Bull and Bear.
Bull:
 A Bull or Tejiwala is an operator who expects a rise in prices of securities in the future.
 The bull speculator stimulates the price to rise. He is an optimistic speculator.
 In anticipation of price rise he makes purchases of shares at present and other securities with the
intention to sell at higher prices in future
Bear:
 A bear or Mandiwala speculator expects prices to fall in future and sells securities at present with a view
to purchase them at lower prices in future.
 The bear speculator tends to force down the prices of securities. A bear is a pessimistic speculator.
3. Explain Stag and Lame Duck.
Stag:
 A stag is a cautious speculator in the stock exchange. He applies for shares in new companies and expects
to sell them at a premium, if he gets an allotment.
 He selects those companies whose shares are in more demand and are likely to carry a premium.
 He sells the shares before being called to pay the allotment money. He is also called a premium hunter.
Lame Duck:
 When a bear finds it difficult to fulfill his commitment, he is said to be struggling like a lame duck.
 A bear speculator contracts to sell securities at a later date. On the appointed time he is not able to get
the securities as the holders are not willing to part with them.
 In such situations, he feels concerned. Moreover, the buyer is not willing to carry over the transactions.
4. Explain National Stock Market System. (NSMS)
National stock market system was advocated by the - High Powered Group on the Establishment of New
Stock Exchanges headed by Shri.M.J.Pherwani (popularly known as Pherwani Committee). At present the
National Stock Market in India comprises the following:
1. National Stock Exchange of India Limited (NSE)
2. Stock Holding Corporation of India Limited (SHCIL)
3. National Clearing and Depository System (NCDS)
4. Securities Trading Corporation of India (STCI)
5. National Securities Depositary Limited (NSDL)
5. Explain National Stock Exchange. (NSE)
 NSE was incorporated in November, 1992. It is a country wide, screen based, online and order driven
trading system.
 It uses satellite link to spread trading throughout the country thereby connecting members scattered all
over the India.
 Through computer network, member‘s orders for buying and selling within prescribed price are matched
by central computer with each other and instantly communicate to the trading member.
 NSE has two segments, i.e., Debt segment and Capital segment. It has ushered in transparent, screen
based and user friendly trading of global standards. It has revolutionised stock trading in India.

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PGT Commerce
 22

III. Long Answer Questions:

1. Explain the functions of Stock Exchange. (Any 5)
1. Ready and Continuous Market
Stock Exchange is, in fact, a market for existing securities. If an investor wants to sell his securities, he can
easily and quickly dispose them off on a stock exchange.
2. Protection to Investors
All dealings in a stock exchange are in accordance with well-defined rules and regulations. For example,
brokers cannot charge higher rate of commission for their services. Any malpractice will be severely punished.
3. Aid to Capital Formation
Stock exchanges thus ensure a steady flow of capital into industry and assists industrial development.
4. Correct Evaluation of Securities
The prices at which securities are bought and sold are recorded and made public. These prices are called
“market quotations”.
5. Facilities for Speculation
Speculation is an integral part of stock exchange operations. As a result of speculation, demand for and
supply of securities are equalized. Similarly, price movements are rendered smoothly.
6. Clearing House of Business Information
stock exchange publish every year books detailing the financial position of companies. Thus, it gives vital
information to the investing public for deciding on investment.

2. Explain the features of Stock Exchange. (Any 5)

1. Market for Securities
Stock exchange is a market, where securities of corporate bodies, government and semi-government
bodies are bought and sold.
2. Deals in Second Hand Securities
It deals with shares, debentures bonds and such securities already issued by the companies. In short, it
deals with existing or second hand securities and hence it is called secondary market.
3. Association of Persons
A stock exchange is an association of persons or body of individuals which may be registered or
unregistered.
4. Recognition from Central Government
Stock exchange is an organised market. It requires recognition from the Central Government.
5. Working as per Rules
Buying and selling transactions in securities at the stock exchange are governed by the rules and
regulations of stock exchange as well as SEBI Guidelines. No deviation from the rules and guidelines is allowed in
any case.
6. Regulates Trade in Securities
Stock exchange does not buy or sell any securities on its own account. It merely provides the necessary
infrastructure and facilities for trade in securities to its members and brokers who trade in securities.

3. Explain the Benefits of Stock Exchange.

A. Benefits to the Community
i. Economic Development
It accelerates the economic development by ensuring steady flow of savings into productive purposes.
ii. Fund Raising Platform
It enables the well-managed, profit-making companies to raise limitless funds by fresh issue of shares
from time to time.
iii. Capital Formation
It encourages capital formation.

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PGT Commerce
iv. Fund Raiser for Government
23
It enables Government to raise funds for undertaking projects through sale of securities on the stock
exchange. Thus stock exchange serves as a platform for raising public debt.
B. Benefits to the Company
i. Enhances Goodwill or Reputation
Companies whose shares are quoted on a stock exchange enjoy greater goodwill and credit standing.
ii. Wide Market
There is a wide and ready market for such securities.
iii. Raises huge funds
Stock Exchange can raise huge funds easily by issue of shares and debentures.
iv. Increases bargaining strength
Companies whose shares rise in the stock exchange command higher bargaining power in the event of
further expansion, merger or amalgamation.
C. Benefits to Investors
i. Liquidity
Stock exchange helps an investors to convert his shares into cash quickly and thus increases the liquidity
of his investments.
ii. Investor protection
The stock exchange safeguards, investor’s interest and ensures fair dealing by strictly enforcing its rules
and regulations.
iii. Assessing real worth of security
An investor can easily assess the real worth of securities in his hands, as market quotations are published
daily in the newspapers and in websites.
iv. Mechanism to trade security
Stock Exchange provides a mechanism by which purchase and sale of listed securities take place in a
matter of few minutes.

4. Distinguish between Stock Exchange and Commodity Exchange.

SL.NO FEATURE
1 Meaning
2 Function
3 object
STOCK EXCHANGE
Stock Exchange (also called Stock
Market or Share Market) is one
important constituent of capital
market. Stock Exchange is an
organized market for the purchase
and sale of industrial and financial
security.
Providing easy marketability
Object is facilitating capital
formation and making best
use of capital resources
COMMODITY EXCHANGE
A commodity exchange is an exchange
where commodities are traded. Tradable
commodities are
 Metals (e.g. gold, silver,copper)
 Energy (e.g. crude oil, natural gas)
 Agricultural (e.g. rice, wheat, cocoa)
 Livestock and meat(e.g. live cattle,
lean hog)
Offering hedging or price insurance services
and liquidity to securities.
Object is facilitating goods
flow through risk reduction

4 Participants Investors and Speculators Producers, dealers, traders and a

5 Articles
Traded
6 Period of dealings
Industrial securities such as stocks
and bonds and government
securities.
Cash, ready delivery and dealings
for account for a fortnight
body of speculators.
Only durable, graded and goods having
large volume of trade, price uncertainty
and uncontrolled supply
Instant cash dealings and a settlement
period of 2 or 3 months for Future Market
dealings

D.Chithambararaj
PGT Commerce
 www.nammakalvi.in
24

5. Explain Lombard Street and Wall Street.

Lombard Street:
 Lombard Street, London, is a street notable for its connections with the City of London's merchant,
banking and insurance industries, stretching back to medieval times.
 From Bank junction, where nine streets converge by the Bank of England, Lombard Street runs southeast
for a short distance before bearing left into a more easterly direction, and terminates at a junction with
Grace Church Street and Fenchurch Street.
 Its overall length is 260 meters It has oft en been compared with Wall Street in New York City

Wall Street:
 Wall Street is a street in lower Manhattan that is the original home of the New York Stock Exchange and
the historic headquarters of the largest U.S. brokerages and investment banks.
 The term Wall Street is also used as a collective name for the financial and investment community, which
includes stock exchanges and large banks, brokerages, securities and underwriting firms, and big
businesses.
 Today, brokerages are geographically diverse, allowing investor’s free access to the same information
available to Wall Street's tycoons.

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PGT Commerce
 25
Chapter 8: SECURITIES EXCHANGE BOARD OF INDIA(SEBI)

I. Very Short Answer Questions:

1. Write a short notes on SEBI.
Securities and exchange board of India( SEBI) is an apex body that maintains and regulates our capital
market. It was established in 1988 by Indian government but got the statutory powers in 1992.

2. Write any two objectives of SEBI.

1. Regulation of Stock Exchanges
The first objective of SEBI is to regulate stock exchanges so that efficient services may be provided to all
the parties operating there.
2. Protection to the Investors
The capital market is meaningless in the absence of the investors. Therefore, it is important to protect the
interests of the investors.

3. What is Demat account?

 A demat account holds all the shares that are purchased in electronic or dematerialized form.
 Like the bank account, a demat account holds the certificates of financial instruments like shares,
bonds, government securities, mutual funds and exchange traded funds (ETFs).

4. Mention the headquarters of SEBI.

SEBI has its headquarters at the business district of BandraKurla Complex in Mumbai, and has Northern,
Eastern, Southern and Western Regional Offices in New Delhi, Kolkata, Chennai and Ahmedabad respectively.

5. What are the various ID proofs?

PAN card, voter's ID, passport, driver's license, bank attestation, IT returns, electricity bill, telephone bill,
ID cards with applicant's photo issued by the central or state government and its departments, statutory or
regulatory authorities, etc..

II. Short Answer Questions:

1. What is meant by Dematerialization?
Dematerialization is the process by which physical share certificates of an investor are taken back by the
company/registrar and destroyed. Then an equivalent number of securities in the electronic form are credited to
the investors account with his Depository Participant.

2. What are the documents required for a Demat account?

You need to submit proof of identity and address along with a passport size photograph and the account
opening form. Only photocopies of the documents are required for submission, but originals are also required
for verification.

3. What is the power of SEBI under Securities Contract Act?

 For effective regulation of stock exchange, the Ministry of Finance issued a Notification on 13 September,
1994 delegating several of its powers under the Securities Contracts (Regulations) Act to SEBI.
 SEBI is also empowered by the Finance Ministry to nominate three members on the Governing Body of
every stock exchange.
4. What is meant by Insiders trading?
 Insider trading means the buying and selling of securities by directors Promoters, etc.
 Who have access to some confidential information about the company and who wish to take advantage
of this confidential information.
 This affects the interests of the general investors and is essential to check this tendency. Many steps have
been taken to check insider trading through the medium of the SEBI.

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 26
5. Draw the organization structure of SEBI.

Director

Additional Director Technical Director

Additional /Joint
Directors/Joint (Administration) Directors(System)
Directors
Deputy Director Deputy
(Administration) Directors(System)
Deputy Directors
/Assitant Director
Assitant Director Assitant
(Administration) Director(System)

Section Officers Technical

(Administration) Assistants

III. Long Answer Questions:

1. What are the functions of SEBI?
a) Safeguarding the interests of investors by means of adequate education and guidance.
b) Regulating and controlling the business on stock markets.
c) Barring insider trading in securities.
d) Prohibiting deceptive and unfair methods used by financial intermediaries operating in securities
markets.
e) Registering and controlling the functioning of stock brokers, sub-brokers, share transfer agents, bankers
f) SEBI regulates mergers and acquisitions as a way to protect the interest of investors.
g) Registering and controlling the functioning of collective investment schemes such as mutual funds.
h) Promoting self-regulatory organization of intermediaries. It has extensive legal powers.
i) Carrying out steps in order to develop the capital markets by having an accommodating approach.
j) Provide appropriate training to financial intermediaries.
k) Levying fee or any other type of charges to carry out the purpose of the Act
l) Performing functions that may be assigned to it by the Central Government of India.
2. Explain the powers of SEBI.
1. Powers Relating to Stock Exchanges &Intermediaries
SEBI has wide powers regarding the stock exchanges and intermediaries dealing in securities. It can ask
information from the stock exchanges and intermediaries regarding their business transactions for inspection or
scrutiny and other purpose.
2. Power to Impose Monetary Penalties
SEBI has been empowered to impose monetary penalties on capital market intermediaries and other
participants for a range of violations. It can even impose suspension of their registration for a short period.
3. Power to Initiate Actions in Functions Assigned
SEBI has a power to initiate actions in regard to functions assigned. For example, it can issue guidelines to
different intermediaries or can introduce specific rules for the protection of interests of investors.
4. Power to Regulate Insider Trading
SEBI has power to regulate insider trading or can regulate the functions of merchant bankers.

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PGT Commerce
 www.nammakalvi.in
5. Powers under Securities Contracts Act
27
For effective regulation of stock exchange, the Ministry of Finance issued a Notification on 13 September,
1994 delegating several of its powers under the Securities Contracts (Regulations) Act to SEBI. SEBI is also
empowered by the Finance Ministry to nominate three members on the Governing Body of every stock
exchange.
6. Power to Regulate Business of Stock Exchanges
SEBI is also empowered to regulate the business of stock exchanges, intermediaries associated with the
securities market as well as mutual funds, fraudulent and unfair trade practices relating to securities and
regulation of acquisition of shares and takeovers of companies.

3. What are the benefits of Dematerialisation?

i. The risks pertaining to physical certificates like loss, theft, forgery and damage are eliminated completely with
a DEMAT account.
ii. The lack of paperwork enables quicker transactions and higher efficiency in trading.
iii. Trading has become more convenient as one can trade through computers at any location, without the need
of visiting a broker.
iv. The shares that are created through mergers and consolidation of companies are credited automatically in the
DEMAT account.
v. As all the transactions occur through the depository participant, a trader does not have to communicate
individually with each and every company.
vi.There is no need for stamp duty for transfer of securities; this brings down the cost of transaction significantly.
vii. Certain banks also permit holding of both equity and debt securities in a single account.
viii. Banks also provide dedicated and trained customer care officers to assist through all the procedures.
ix. A DEMAT account holder can buy or sell any amount of shares.However, there is limit on the number of
transactions done using physical securities.
x. One can also choose to take a loan against securities which are held in a DEMAT account by offering it as a
collateral to the lender.

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PGT Commerce
 28
Chapter 9: FUNDAMENTALS OF HUMAN RESOURCE MANAGEMENT

I. Very Short Answer Questions:

1. Give the meaning of Human Resource.
Not all human beings are considered to be human resources but only those individuals who acquired the
required skill sets, talents, knowledge, competencies and capabilities in the accomplishment of both individual
and organisational objectives.
2. What is Human Resource Management ?
Human Resource Management is a function of management concerned with hiring, motivating and
maintaining people in an organisation. It focuses on people in an organisation.
3. State two features of HRM.
i. Universally relevant :
Human Resource Management has universal relevance. The approach and style varies depending the
nature of organisation structure and is applicable at all levels.
ii. Goal oriented :
The accomplishment of organisational goals is made possible through best utilisation of human resource
in an organisation.
4. Mention two characteristics of Human Resource.
 Human resource is the only factor of production that lives
 Human resource created all other resources
 Human resource exhibits innovation and creativity
5. List the functions of HRM
I. Managerial function - Planning, Organising, Directing, Controlling.
II. Operative function – Procurement, Development, Compensation, Retention, Integration,
Maintenance.

II. Short Answer Questions:

1. Define the term Human Resource Management.
According to Dale Yoder Human Resource Management as “the effective process of planning and
directing the application, development and utilisation of human resources in employment”.
2. What are the features of Human resources ?
 Human resource is the only factor of production that lives
 Human resource created all other resources
 It is only the labour of employees that is hired and not the employee himself
 Human resource exhibits innovation and creativity
 Human resource alone can think, act, analyse and interpret
3. Give two points of differences between HR and HRM.
 HR is Human Resources, these are the people who make up the workforce of an organisation.
HRM is the art of management which deals with recruiting,hiring,deploying and most importantly taking
care of the human resources of the organisation.
 In an organisation the human resource are the employees who are inevitable for the survival and success
of the enterprise.
In short, it is managing people of different levels for the accomplishment of the organisational goals
4. What is the importance of Human resource?
 It is only through human resource all other resources are effectively used
 The sustainable growth of an organisation depends on the important resource human resource
 Industrial relations depend on human resource
 Human relations is possible only through human resource
 Human resource manages all other factors of production

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PGT Commerce
5. State the functions of Human Resource Management.
29
I. Managerial function - Planning, Organising, Directing, Controlling.
II. Operative function – Procurement, Development, Compensation, Retention, Integration,
Maintenance.

III. Long Answer Questions:

1. Explain the unique features of Human Resource.
 Human resource is the only factor of production that lives
 Human resource created all other resources
 It is only the labour of employees that is hired and not the employee himself
 Human resource exhibits innovation and creativity
 Human resource alone can think, act, analyse and interpret
 Human resources are emotional beings
 Human resources can be motivated either financially or non financially
 The behaviour of human resources are unpredictable
 Over years human resources gains value and appreciates
 Human resources are movable
 Human resource can work as a team

2. Describe the significance of Human Resource Management.

i. To identify manpower needs :
Determination of manpower needs in an organisation is very important as it is a form of investment. The
number of men required are to be identified accurately to optimise the cost.
ii. To incorporate change :
Change is constant in any organisation and this change has to be introduced in such a way that the
human resource management acts as an agent to make the change effective.
iii. To ensure the correct requirement of manpower:
At any time the organisation should not suffer from shortage or surplus manpower which is made
possible through human resource management.
iv. To select right man for right job:
Human resource management ensures the right talent available for the right job, so that no employee is
either under qualified or over qualified.
v. To update the skill and knowledge:
Managing human resource plays a significant role in the process of employee skill and knowledge
enhancement to enable the employees to remain up to date through training and development programmes.
vi. To appraise the performance of employees:
Periodical appraisal of performance of employees through human resource management activities boosts
up good performers and motivates slow performers. It helps the workforce to identify their level of
performance.
vii. To improve competitive advantage:
Organisations with capable and competent employees can truly gain competitive advantage in the
globalised market. Higher the level of good performers greater the possibility of fast paced growth of the
enterprise.
viii. To provide incentives and bonus to best performers:
It is the role of human resource management to recognise the best performers and to provide them with
bonus and incentives as a form of appreciation for their work.

3. Elaborate on the Managerial functions of Human Resource Management.

i. Planning :
Planning is deciding in advance what to do, how to do and who is to do it. It bridges the gap between
where we are and where we want to go. It helps in the systematic operation of business.

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PGT Commerce
 www.nammakalvi.in
ii. Organising:
30
It includes division of work among employees by assigning each employee their duties, delegation of
authority as required and creation of accountability to make employees responsible.
iii. Directing:
It involves issue of orders and instructions along with supervision, guidance and motivation to get the
best out of employees. This reduces waste of time energy and money and early attainment of organisational
objectives.
iv. Controlling:
It is comparing the actuals with the standards and to check whether activities are going on as per plan
and rectify deviations.
4. Differentiate HR from HRM.
BASIS FOR COMPARISON HRM HR
Human Resource Management In an organisation the human
refers to the application of resource are the employees who
Meaning principles of management to are inevitable for the survival and
manage the people working in the success of the enterprise.
organization
In order to achieve the personal and Human resource is the only factor of
organisational objectives human production that lives
What is it?
resources are to be trained up and
managed
Its concerned with hiring, The sustainable growth of an
motivating and maintaining people organisation depends on the
Function
in an organisation. It focuses on important resource human resource
people in an organisation.
To improve the performance of the Human resource exhibits innovation
Objective
employees and creativity
Human resource management Human resources can be motivated
Characteristics ensures the right talent available for either financially or non financially
the right job.
5. Discuss the Operating functions HRM.
i. Procurement :
Acquisition deals with job analysis, human resource planning, recruitment, selection, placement, transfer
and promotion.
ii. Development :
Development includes performance appraisal, training, executive development, career planning and
development, organisational development
iii. Compensation :
It deals with job evaluation, wage and salary administration, incentives, bonus, fringe benefits and social
security schemes
iv. Retention :
This is made possible through health and safety, welfare, social security, job satisfaction and quality of
work life
v. Integration :
It is concerned with the those activities that aim to bring about reconciliation between personal interest
and organisational interest
vi. Maintenance :
This encourages employees to work with job satisfaction, reducing labour turnover, accounting for
human resource and carrying out audit and research.
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PGT Commerce
 31
Chapter 10: RECRUITMENT METHODS

I. Very Short Answer Questions:

1. Give the meaning of Recruitment.
Recruitment is the process of finding suitable candidates for the various posts in an organisation. It is a
process of attracting potential people to apply for a job in an organisation.
2. What is promotion?
It’s based on seniority and merits of the employees they are given opportunity to move up in the
organisational hierarchy
3. State two benefits of internal source of recruitment.
 Reduce time to hire
 Cost less
 Continuity of operations
 Increased morale and retention
4. Mention any two features of campus recruitment.
 We can identify new talents
 It’s a costless method of recruitment
 We can conduct interview for more number of candidates and select best one
5. List the benefits of external source of recruitment.
 External recruitment helps you to assess a pool of best or talented employees for the job you need to fill.
 External recruitment provides an opportunity for a fresh outlook on the industry that a company may
need to stay competitive.

II. Short Answer Questions:

1. Define the term Recruitment.
According to Edwin B. Flippo, “It is a process of searching for prospective employees and stimulating and
encouraging them to apply for jobs in an organisation.”
2. What are the features of internal source of recruitment?
 Increased morale and retention. Other employees see there is room for advancement and reward for a
job well done.
 Continuity of operations. Chances are that an internal employee can transition into the new role with
minimal downtime.
 Less paperwork.
3. Give two points of differences between advertisement and unsolicited application.
i. Advertisements
i. The employer can advertise in dailies, journals, magazines etc. about the vacancies in the organisation
specifying the nature of work, nature of vacancy, qualification and experience required, salary offered, mode of
applying and the time limit within which the candidate has to apply.
ii. Its very expensive method of recruitment
ii. Unsolicited applicants
i.These are the applications of job seekers who voluntarily apply for the vacancies not yet notified by the
organisations.
ii.Its not a expensive method of recruitment.
4. What is the importance of job portals?
 Using internet job portals organisations can screen for the prospective candidates and fill up their
vacancies
 It’s bridging the gap between the recruiters and the job seekers.
 Job Portals help to reach out to a wider audience.
 Job search portals make job searching time-efficient, easy and convenient.

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PGT Commerce
5. State the steps in Recruitment process
32
i. Planning recruitment
ii. Determining vacancies
iii. Identifying the sources
iv. Drafting information for advertisement
v. Selecting the suitable mode of advertisement
vi. Facilitating selection process
vii. Evaluation and control

III. Long Answer Questions:

1. Explain the different methods of recruitment.
Internal Sources:
1. Transfer-transfer of employee from one department with surplus staff to that of another with deficit staff.
2. Upgrading-Performance appraisal helps in the process of moving employees from a lower position to a higher
position
3. Promotion-Based on seniority and merits of the employees they are given opportunity to move up
4. Demotion-Movement of employee from a higher position to a lower position because of poor performance
5. Recommendation by existing Employees-A family member, relative or friend of an existing employee can be
recruited and placed
6. Job rotation-One single employee managing to learn how to perform in more than one job on rotation
7. Retention – The retiring employees can be used to meet the requirement after superannuation.
8. Retired employees- The employees who have already retired can be called to fill the vacancy.
9. Dependants- The legal heir or the dependent employee may be given a chance to replace the deceased.
10. Previous applicants- whose name appears in the data base but not selected at that point of time can be
utilized.
11. Acquisitions and Mergers External Sources - organisation acquires another business unit or merging with
another establishment.
External Sources:
i. Direct:
1. Advertisements- The employer can advertise in dailies, journals, magazines etc. about the vacancies in the
organisation
2. Unsolicited applicants- job seekers who voluntarily apply for the vacancies not yet notified by the
organisations.
3. Walk ins- Walk-in applicants with suitable qualification and requirement can be another source of
requirement.
4. Campus Recruitment- The organisations visit the educational institutions to identify and recruit suitable
candidates
5. Recruitment at Factory gate- casual or temporary unskilled employees are recruited by this way, paid on
hourly or daily basis
6. Rival firms- efficient employees of rival companies are drawn to the organisations by higher pay and benefits
7. E Recruitment - – The organisations which carry out recruitment online methods is said to follow e
recruitment
ii. Indirect:
1. Employee referral- The existing employees of the organisation may recommend some of their relatives
2. Government/ Public Employment Exchanges- These are exchanges established by Government which
facilitates recruitment throughout the country.
3. Private Employment Agencies- These are similar to Public employment exchanges except that the ownership
is the hands of Private parties.
4. Employment Consultancies- These types of firms facilitate recruitment on behalf of client companies at cost
5. Professional Associations- Organisations seeking applicants of high calibre and repute with technical
knowledge approach professional associations to identify the right person.

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PGT Commerce
 www.nammakalvi.in
6. Deputation- A person who is already an employee of an organisation can be deputed for a specific job for a
33
specified period as a short term solution.
7. Word of mouth- The information relating to job seekers is collected through people of repute who pass on the
message about the vacancy to their known people.
8. Labour Contractors- Organisations recruit unskilled and manual labourers through these contractors.
9. Job Portals- Using internet job portals organisations can screen for the prospective candidates and fill up their
vacancies

2. Describe the significance of External source of recruitment.

 When an organization recruits externally, it opens the organization up to a larger pool of applicants,
which increases its chance of finding the right person for the job.
 External recruitment provides an opportunity for a fresh outlook on the industry that a company may
need to stay competitive.
 Bringing in fresh talent from the outside can help motivate the current employees to produce and
achieve more in hopes of obtaining the next promotional opportunity
 Looking outside the organization also allows a company to target the key players that may make its
competition successful.
 Hiring an external candidate also opens up many opportunities to find experienced and highly-qualified
and skilled candidates who will help a company meet its diversity requirements.

3. Elaborate on the factors affecting recruitment.

I. INTERNAL FACTORS:
1. Recruitment Policy
The recruitment policy of the organization i.e. recruiting from internal sources and external also affect
the recruitment process.
2. Size of the Organization
The size of the organization affects the recruitment process. If the organization is planning to increase its
operations and expand its business, it will think of hiring more personnel, which will handle its operations.
3. Cost involved in recruitment
Recruitment process also counts the cost to the employer, that’s why organizations try to
employ/outsource the source of recruitment which will be cost effective to the organization for each candidate.
4. Growth and Expansion
Organization will utilize or consider utilizing more work force in the event that it is growing its operations.
II. EXTERNAL FACTORS
1. Supply and Demand:
The availability of manpower both within and outside the organization is an essential factor in the
recruitment process
2. Labour Market
Employment conditions where the organization is located will affected by the recruiting efforts of the
organization.
3. Political-Social- Legal Environment
Different government controls forbidding separation in contracting and work have coordinate effect on
enlistment practices.
4. Unemployment Rate
The Element that influence the availability of applicants is the economy growth rate
5. Competitors
The recruitment policies and procedure an of the competitors also affect the recruitment function of the
organizations.

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PGT Commerce
 34

4. Differentiate Recruitment and Selection.

SL.NO Basis of Comparison Recruitment
Recruitment is an activity of
1 Meaning searching candidates and
encouraging them to apply for it
Approach under recruitment is
2 Approach
positive one.
Inviting large number of candidates
3 Objective
to apply for the vacant post
4 Sequence First
5 Method It is an economical method
Recruitment process is very simple
6 Process
Selection
Selection refers to the process of
selecting the suitable candidates and
offering them job.
Approach under selection is negative
one
Picking up the most suitable candidates
and eliminating the rest
Second
It is an expensive method
Selection process is very complex and
complicated

5. Discuss the importance of Recruitment.

 Attract and encourage a good number of candidates to apply for the organizational vacancies.
 Determine present and future organizational requirement taking into consideration of personnel
planning and job analysis activities.
 Links the employers with the potential employees.
 Increase potential candidate’s pool at less cost.
 Increases success rate of selection process by reducing the number of under qualified or overqualified job
applicants.
 Reduce the probability of leaving the organization only after a short period of time, once recruited and
selected.
 Meet the organizations’ legal and social obligations maintaining its workforce composition.
 Determine the appropriateness of the candidates by identifying and preparing potential job applicants.
 Increase organizational and individual effectiveness regarding application of various recruitment
techniques and taping different sources of recruitment concerned.

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D.Chithambararaj
PGT Commerce
Chapter 11: EMPLOYEE SELECTION PROCESS
35
I. Very Short Answer Questions:
1. What is selection?
 Selection is the process of choosing the most suitable person for the vacant position in the organization.
 The main aim of selection process is to find out the suitable candidate for specific job.
2. What is an interview?
 An interview is a purpose full exchange of ideas, the answering of questions and communication between
two or more persons.
 Face to face interaction between the interviewer and interviewee
3. What is intelligence test?
 Intelligence tests are one of the psychological tests, that is designed to measure a variety of mental
ability, individual capacity of a candidate.
 The main aim of these tests is to obtain an idea of the person’s intellectual potential.
4. What do you mean by test?
Several tests are conducted in the selection process to ensure whether the candidate possesses the
necessary qualification to fit into various positions in the organization.
5. What do you understand about bio data?
It contains the information about the job seeker date of birth, gender, religion, nationality, residence,
marital status, family background, educational qualification, co-curricular activities, work experience, exposure
to related activities, scale of pay drawn, academic distinction, area of expertise and so on.
6. What do you mean by placement?
 Placement is a process of assigning a specific job to each and every candidate selected.
 The process of placing the right man on the right job is called ‘Placement’.
II. Short Answer Questions:
1. What is stress interview?
 This type of interview is conducted to test the temperament and emotional balance of the candidate
 Interviewer deliberately creates stressful situation by directing the candidate to do irrational and
irritating activities.
 They assess the suitability of the candidate by observing the reaction and response of the candidate to
the stressful situations.
2. What is structured interview?
 Under this method, a series of question to be asked by the interviewer are pre-prepared by the
interviewer and only these questions are asked in the interview.
 Ultimately interviewees are ranked on the basis of score earned by the candidate in the interview.
3. Name the types of selection test?
1. Ability Tests
 Aptitude Test
 Achievement Test
 Intelligence Test
 Judgment Test
2. Personality Tests
 Interest Test
 Personality Test
 Projective Test
 Attitude Test
4. What do you mean by achievement test?
 This test measures a candidate’s capacity to achieve in a particular field.
 This test measures a candidate’s level of skill in certain areas, accomplishment and knowledge in a
particular subject.
 The regular examination conducted in educational institution represents achievement test. It is also
called proficiency test.
Example : A driver may be asked to drive a vehicle to test his driving efficiency

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PGT Commerce
 www.nammakalvi.in
5. Why do you think the medical examination of a candidate is necessary?
36
Yes, because a person of poor health cannot work competently and any investment on him may go
waste, if he/she is unable to discharge duties efficiently on medical grounds.
6. What is aptitude test?
 Aptitude test is a test to measure suitability of the candidates for the post/role.
 It actually measures whether the candidate possess a set of skills required to perform a given job.
 It helps in predicting the ability and future performance of the candidate.
7. How is panel interview conducted?
 Where a group of people interview the candidate, it is called panel interview.
 Usually panel comprises chair person, subject expert, psychological experts, nominees of higher bodies
and so on.
 All panel members ask different types of questions on general areas of specialization of the candidate.
 Each an every member awards marks for the candidate separately. At the end, the marks awarded by all
the members are aggregated and the candidates are ranked accordingly.
 This method eliminates bias in selection process.
8. List out the various selection interviews.
 Preliminary Interview
 Structure/Guided/Planned Interview
 Unstructured Interview
 In depth Interview
 Panel Interview
 Stress Interview
 Telephone Interview
 Online Interview
 Group interview
 Video Conferencing Interview
9. List out the significance of placement.
i) It improves employee morale
ii) It helps in reducing employee turnover
iii) It helps in reducing conflict rates or accidents
iv) It avoids misfit between the candidates and the job.
v) It helps the candidate to work as per the predetermined objectives of the organization
vi) It involves assigning a specific rank and responsibilities to an individual
vii) It helps to avoid short term staff shortage.

III. Long answer questions:

1. Briefly explain the various types of tests.
A) Ability Test
A test designed to measure an individual’s cognitive function in a specific area, such as variety of skills,
mental aptitude, problem solving, knowledge of particular field, reasoning ability, intelligence etc. This test is
used to find the suitability of a candidate for a given job role.
1. Aptitude test
Aptitude test is a test to measure suitability of the candidates for the post/role. It actually measures whether the
candidate possess a set of skills required to perform a given job. It can be measured by the following ways:
i) Numerical Reasoning Test
 This test measures the candidate's ability to make correct decision from numerical data.
ii) Verbal Reasoning Test
 It measures the candidate's ability to comprehend the written text and ability to arrive at factual
conclusion from the written text.
iii) Inductive Reasoning Test
 It’s a psychometric tests conducted in the selection process to measure the problem solving abilities and
ability to apply logical reasoning.

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PGT Commerce
iv) Mechanical Reasoning Test
37
 This test measures the engineering student’s ability to apply engineering concepts in actual practice.
v) Diagrammatic Reasoning Test
 This test measures the candidate’s ability to understand the shapes, abstract ideas and ability to observe
and extract values from illustrations and apply them to new samples.
vi) Spatial Reasoning Test
 The test measures the candidate’s ability to clearly manipulate and remember the shapes, still images,
and find out pattern which govern the sequence.
vii) Situational Judgment Test
 This test measures the candidate’s ability to choose the most desirable action in critical situations using
his judging ability.
viii) Mental Arithmetic Test
 It tests the candidate’s basic numerical ability like addition, subtraction, multiplication, division and
fraction. It tests the speed of doing calculation.
ix) Vocabulary Test
 The test measures candidate’s ability to recognize the relationship among the ideas, think methodically
and fluency in English language.
x) Number Sequence Test
 This measures the candidate’s ability to find a logic in a series or pattern. Under this test, candidates
have to find out missing number in a sequence to determine the pattern.
2. Achievement Test
This test measures a candidate’s capacity to achieve in a particular field. The regular examination
conducted in educational institution represents achievement test. It is also called proficiency test.
Example,
a) A driver may be asked to drive a vehicle to test his driving efficiency
b) Teacher candidate may be asked to give a demonstration
3. Intelligence Tests
Intelligence tests are one of the psychological tests, that is designed to measure a variety of mental
ability, individual capacity of a candidate. The main aim of these tests is to obtain an idea of the person’s
intellectual potential.
4. Judgment Test
This test is conducted to test the presence of mind and reasoning capacity of the candidates
B. Personality test
Personality test refers to the test conducted to find out the non-intellectual traits of a candidate namely
temperament, emotional response, capability and stability. There is no right or wrong answer in the test. It
comprises of following tests.
1. Interest Test
 Interest test measures a candidate’s extent of interest in a particular area chosen by him/her so that
organization can assign the job suited to his/her in term.
2. Personality Inventory Test
 Under this method standardised questionnaire is administered to the candidate to find out traits like
interpersonal rapport, dominance, intravertness, extravertness, self confidence, lower sign quality etc.
This test assesses the reliability and innate characters of the candidate concerned.
3. Projective Test / Thematic Appreciation Test
 This test measures the candidate’s values, attitude apprehensive personality etc. out of the
interpretation or narration given by the candidate to the pictures, figures etc. shown to him in the test
situation.
4. Attitude Test
 This test measures candidate’s tendencies towards the people, situation, action and related things. For
example, morale study, values study, social responsibility study expresses attitude test and the like are
conducted to measure the attitude of the candidate.

D.Chithambararaj
PGT Commerce
2. Explain the important methods of interview.
38
i) Preliminary Interview
 This interview is conducted to know the general suitability of the candidates who have applied for the
job.
 Team of experts conducts their interview primarily to eliminate those who are unqualified and unfit
candidates.
ii) Structure/Guided/Planned Interview
 A series of question to be asked by the interviewer are pre-prepared by the interviewer and only these
questions are asked in the interview.
 Ultimately interviewees are ranked on the basis of score earned by the candidate in the interview.
iii) Unstructured Interview
 There is no pre-prepared question. Interviewers determine the suitability of the candidate based on their
response to the random questions raised in the interview.
iv) In depth Interview
 Interview helps the interviewers to learn about the candidate’s expertise and practical exposure with
respect to his/her area of specialization.
v) Panel Interview
 Where a group of people interview the candidate, it is called panel interview.
 Usually panel comprises chair person, subject expert, psychological experts, nominees of higher bodies
and so on.
 All panel members ask different types of questions on general areas of specialization of the candidate.
 Each an every member awards marks for the candidate separately. At the end, the marks awarded by all
the members are aggregated and the candidates are ranked accordingly.
 This method eliminates bias in selection process.
vi) Stress Interview
 This type of interview is conducted to test the temperament and emotional balance of the candidate
 Interviewer deliberately creates stressful situation by directing the candidate to do irrational and
irritating activities.
 They assess the suitability of the candidate by observing the reaction and response of the candidate to
the stressful situations.
vii) Telephone Interview
Where the candidates live far away from organization and find it difficult to attend preliminary interview
for various reasons, telephone interview is conducted by some organization to eliminate unfit and unsuitable
candidate at the preliminary stage itself.
viii) Online Interview
Due to tremendous growth in information and communication technology, these days interviews are
conducted by means of internet via Skype, We chat, Google duo, Viber, Whatsapp or Video chat applications.
This enables the interviewers to conduct interview with the candidates living in faraway places. They saves a lot
of time, money and energy both for employer's organisation and the candidate.
ix) Group interview
 A group interview is a screening process where multiple candidates are interviewed at the same time.
Instead of spending 5 hours interviewing 5 candidates individually, one hour can be spent interviewing
them in a group. Some time particular topic is given to the group, and they are asked to discuss it.
x) Video Conferencing Interview
 Video conferences interview is similar to face to face interview.
 Video conferencing interview is a kind of conference call that connects the candidate with companies
located across various geographies. Interview can be conducted from a desktop at work, a home
computer or smart phone or a tablet.

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PGT Commerce
 www.nammakalvi.in
3. Explain the principles of placement.
39
1. Job First, Man Next:
 Man should be placed on the job according to the requirements of the job.
 There is no compromise on the requirements or qualifications of the man with respect to job.
 “Job first Man next” should be principles of Placement.
2. Job Offer:
 The job should be offered to the man based on his qualification.
3. Terms and conditions:
 The employee should be made conversant with the conditions and culture prevailing in the organization
and all those things relating to the job.
4. Aware about the Penalties:
 The employee should also be made aware of the penalties if he / she commits a wrong or lapse.
5. Loyalty and Co-operation:
 When placing new recruit on the job, an effort should be made to develop a sense of loyalty and co-
operation in him, so that he/ she may realise his/her responsibilities better towards the job and the
organization.
 Placement is not an easy process. It is very difficult for an new employee, who cannot be expected to be
not familiar with the job and environment. For this reason, the employee is generally put on a
probation/trial period ranging from one year to two years.
 After completion of the probation period, if the employee shows a better performance, he/she is
confirmed at the job as a regular employee of the organization.

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PGT Commerce
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Chapter 12: EMPLOYEE TRAINING METHOD

I. Very Short Answer Questions:

1. What is meant by training?
 Training is the act of increasing / enhancing the new skill of problem solving activity and technical
knowledge of an employee for doing the jobs them self. Training enables the employees to guide their
behaviour.
2. What is Mentoring training method?
 Mentoring is the process of sharing knowledge and experience of an employee.
 Mentoring is always done by senior person, it is also one-to-one interaction , like coaching.
 The focus in this training is on the development of attitude of trainees.
3. What is Role play?
 Under this method trainees are explained the situation and assigned roles.
 They have to act out the roles assigned to them without any rehearsal.
 There are no pre-prepared dialogues.
 Thus they have to assume role and play the role without any preparation.
4. State e-learning method?
 E learning is also often referred to us online learning or web based training.
 E learning training courses can save money to an organizations as they no longer have to pay forcostly
seminar to improve employees skills.
 Under this type of web based training is anywhere and any time information can pass over the internet.

II. Short Answer Questions:

1. What is vestibule training?
 Vestibule training is training of employees in an environment similar to actual work environment
artificially created for training purpose.
 This type of training is given to avoid any damage or loss to machinery in the actual place by trainees and
avoid disturbing the normal workflow in the actual workplace.
 It is given to Drivers, Pilots, Space Scientists etc.,
2. What do you mean by on the job Training?
 On the job training refers to the training which is given to the employee at the work place by his
immediate supervisor.
 It is based on the principle of “Learning by Doing and Learning While Earning”.
 On the job training is suitable for imparting skills that can be learnt in a relatively short period of time.

3. Write down various steps in a training programme.

Whom to Train?

Who is the Trainee?

Who are Trainers?

What Method will be used for Training?

What should be Level the Training?

Where to Conduct the Training Programme?

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 41
4. Write short note on trainer and trainee.
Trainer:
 Trainer is a person who teaches skills to employee and prepare them for a job activity.
 Trainers may be supervisor, coworkers, HR staffs,etc.,
Trainee:
 A person who is learning and practising the skills of particular job is called trainee.
 Trainees should be selected on the basis of self-interest and recommendation by the supervisor or by the
human resource department itself.

III. Long Answer Questions:

1. Define training. Discuss various types of training.
According to Edwin B. Flippo” Training is the act of increasing the Knowledge and skills of an employee for
doing particular jobs”.
(I) On the Job Training:
On the job training refers to the training which is given to the employee at the work place by his
immediate supervisor.
i) Coaching Method:
 The superior teaches or guides the new employee about the knowledge and skills relevant to a given job.
 The superior should point out mistakes committed by the new worker and also advise the remedial measures,
to trainees.
ii) Mentoring method:
 Mentoring is the process of sharing knowledge and experience of an employee.
 Mentoring is always done by senior person; it is also one-to-one interaction, like coaching.
 The focus in this training is on the development of attitude of trainees.
iii) Job Rotation Method:
 Under this method a trainee is periodically shifted from one work to another work and from one
department / division to another department / division for a particular period of time.
 The main aim of job rotation is to expose the employee to various inter related jobs
iv) Job Instruction Techniques (JIT) Method:
 In this method, a trainer at the supervisory level gives some instructions to an employees to how to
perform his job and its purpose.
v) Apprenticeship Training Method:
 The apprentice or trainee learns the job knowledge and skills from the trainer or superior or senior
worker.
 This duration of this training programme ranges from one to five years. The trainee gets the stipend
during the training period.
vi) Committee Assignment:
 When employees are assigned to committee to address a particular issue, they are able to work closely
with other members and committee leader.
 They gain more knowledge by observing and participating in decision making process.
vii)Understudy/Internship Training Method:
 A superior gives training to a subordinates, The subordinates learn through experience and observation
by participating in handling day to day problems.
 purpose of internship training is to prepare subordinate for assuming the full responsibilities and duties.
(II) Off the Job Training
Off the job training is the training method where in the workers/employees learn the job role away from
the actual work floor.
i)Lecture Method:
 Under this method trainees are educated about concepts, theories, principles and application of
knowledge in any particular area.
 Trainer may be generally drawn from Colleges, Universities, Consultancies, etc.,
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PGT Commerce
 www.nammakalvi.in
 They impart training effectively by their oratorical skill, knowledge and practical knowledge using audio
42
visual tools.
ii)Group Discussion Method:
 Participants are divided into various groups; they were provided a particular issue for deliberation.
 Each group has to prepare solution after deep discussion with their group members.
 The group leader has to present the solution to the audience, which will be discussed or deliberated by
other groups.
iii)Case Study Method
 Trainees are described a situations which stimulate their interest to find solution.
 They have to use their theoretical knowledge and practical knowledge to find solution to the problem
presented. There is no single solution to the problem, It may vary depending upon view points of
trainees.
iv) Role Play Method:
 Under this method trainees are explained the situation and assigned roles.
 They have to act out the roles assigned to them without any rehearsal, there are no pre-prepared
dialogues.
 Thus they have to assume role and play the role without any preparation.
v) Seminar/Conference Method:
 This method enables the trainees to listen to the lectures / talk delivered on specific topics and provides
opportunities to participate, to interact with the speaker and get their doubts clarified or select
participants may be allowed to present papers with the audio visual aids as delegates.
 This is one of the oldest method, but still a favorite training method.
vi) Field Trip Method:
 Trainees are taken to actual workplace/ site/facility to gain exposure and knowledge.
 They are explained the process of work by supervisor/ manager of the facility visited by the participants.
 They are free to clarity their doubts from the organization experts.
vii) Vestibule Training Method:
 Vestibule training is training of employees in an environment similar to actual work environment
artificially created for training purpose.
 This type of training is given to avoid any damage or loss to machinery in the actual place by trainees and
avoid disturbing the normal workflow in the actual workplace.
 It is given to Drivers, Pilots, Space Scientists etc.,
viii) E-learning Method:
 E learning is also often referred to us online learning or web based training.
 E learning training courses can save money to an organizations as they no longer have to pay forcostly
seminar to improve employees skills.
 Under this type of web based training is anywhere and any time information can pass over the internet.
ix) Demonstration Training Method:
 This method is a visual display of how something works or how to do something.
 Demonstration involves showing by reason or proof explaining or making clear by use of examples or
experiments.
x) Programmed Instruction Method:
 Under this method, the subject matter to be learnt is presented in a series of units. These units are
arranged from simple to complex level.
 Trainee has to read the unit understand the concept and take part in self-evaluation exercise.
 Programmed instructions is made available in printed form i.e books, table, interactive video and other
formats.

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 43
2. What are the differences between on the job training and off the job training?
SL.NO BASIS On the Job Training Off the Job Training
1 Meaning The employee learns the job in Off the Job training involves the
the actual work environment. training of employees outside the
actual work location
2 Cost It is cheapest to carry out It requires expenses like separate
training rooms, specialist, resources
like projectors.
3 Location At the work place Away from the work place
4 Approach Practical approach Theoretical approach
5 Principle Learning by performing Learning by acquiring knowledge
6 Carried out It is carried out by the Training which is provided by the
experienced employee experts.
7 Methods Coaching, job rotation, Role –plays , seminar, lectures, case
apprenticeship, mentoring, etc studies, etc

3. Explain the benefits of training.

(i) Benefits to the Organization
 It improves the skill of employees and enhances productivity and profitability of the entity.
 It reduces wastages of materials and idle time
 It exposes employees to latest trends.
 It minimizes the time for supervision.
 It reduces the frequency of accidents at workplace and consequent compensation payment.
 It reduces labour turnover of employee
 It improves union and management relation.
(ii) Benefits to the Employees
 It adds to the knowledge skill and competency of employee
 It enables him to gain promotion or achieve career advancement in quick time.
 It improves the employees productivity
 It enhances the morale of the employee.
 Employees get higher earnings through incentives and rewards.
 It builds up the confidence of employee by changing his attitude positively towards to work
 It enables him to observe safety practices voluntarily during his engagement in dangerous operation
(iii)Benefits of Customer
 Customers get better quality of product/ service.
 Customers get innovative products or value added or feature rich products.

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D.Chithambararaj
PGT Commerce
Chapter 13: CONCEPT OF MARKETING AND MARKETER
44

I. Very Short Answer Questions:

1. What is Market?
 It is a medium or place to interact and exchange goods and services.
 In simple words, the meeting place of buyers and sellers in an area is called Market.
2. Define Marketer.
“A person whose duties include the identification of the goods and services desired by a set of
consumers, as well as the marketing of those goods and services on behalf of a company”.
- Business Dictionary
3. What is mean by Regulated Market?
 These are types of markets which are organised, controlled and regulated by statutory measures.
Example: Stock Exchanges of Mumbai, Chennai, Kolkata etc.

4. Mention any four differences between Wholesale Market and Retail market?
BASIS WHOLESALE RETAIL
Meaning Wholesale is a business in which When the goods are sold to the final consumer in
goods are sold in large quantities to small lots
the retailers
Creates link Manufacturer and Retailer Wholesaler and Customer
between
Volume of Large Small
transaction
Deals in Limited products Different products

5. What is meant by Commodity Market?

 A commodity market is a place where produced goods or consumption goods are bought and sold.
Commodity markets are sub-divided into:
i. Produce Exchange Market
ii. Manufactured Goods Market
iii. Bullion Market

II. Short Answer Questions:

1. What can be marketed in the Market?
The dynamic items that can be marketed are listed below:
1.Goods 2.Services 3.Experiences 4.Events 5.Persons
6.Places 7.Properties 8.Organization 9.Information 10.Ideas

2. Mention any three Role of Marketer?

i. Instigator
As an instigator, marketer keenly watches the developments taking place in the market and identifies
marketing opportunities emerging in the ever changing market.
ii. Innovator
Marketer seeks to distinguish his products/services by adding additional features to the existing product.
iii. Implementer
Marketer plays a role of implementer when he/she actually converts marketing opportunities into
marketable product with the help of several functional teams put in place in the organisation.

3. Marketer is an innovator? Do you agree?

Yes I Agree, Marketer seeks to distinguish his products/services by adding additional features, modifying
the pricing structure, introducing new delivery pattern, creating new business models, introducing change in
production process and so on.
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PGT Commerce
 45
4. Why Customer support is needed to Market?
The customer is the foundation of any business' success. ...
 It helps your company to ensure greater customer satisfaction
 It increase its long-term goal of repeat business.
 It’s also an effective way to increase sales and profits.

5. Explain the types of market on the basis of time.

i. Very Short Period Market:
 Markets which deal in perishable goods like, fruits, milk, vegetables etc.,
 There is no change in the supply of goods. Price is determined on the basis of demand.
ii. Short Period Market:
 In certain goods, supply is adjusted to meet the demand. The demand is greater than supply.
iii. Long Period Market:
 This type of market deals in durable goods, where the goods and services are dealt for longer period
usages.

6. List down the functions of Marketer?

 Gathering and Analysing market information
 Market planning
 Product Designing and development
 Standardisation and Grading
 Packaging and Labelling
 Branding
 Customer Support Services

III. Long Answer Questions:

1. How the market can be classified?

I. On the Basis of Geographical Area
a. Family Market:
When exchanges of goods or services are confined within a family or close members of the family, it’s
called as family market.
b. Local Market:
Participation of both the buyers and sellers belonging to a local area or areas, may be a town or village, is
called as local market. The demands are limited in this type of market. For example, perishable goods like fruits,
fish, vegetables etc.
c. National Market:
Certain type of commodities has demand throughout the country. Hence it is called as a national market.
d. International Market or World Market:
World or international market is one where the buyers and sellers of goods are from different countries
i.e., involvement of buyers and sellers beyond the boundaries of a nation.
II. On the Basis of Commodities/Goods
a. Commodity Market:
A commodity market is a place where produced goods or consumption goods are bought and sold.
Commodity markets are sub-divided into:
i. Produce Exchange Market
ii. Manufactured Goods Market
iii. Bullion Market

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PGT Commerce
 www.nammakalvi.in
b. Capital Markets:
46
New or going concerns need finance at every stage. Their financial needs are met by capital markets.
They are of three types:
i. Money Market
ii. Foreign Exchange Market
iii. The Stock Market
III. On the Basis of Economics
a. Perfect Market:
A market is said to be a perfect market, if it satisfies the following conditions:
i. Large number of buyers and sellers are there.
ii. Prices should be uniform throughout the market.etc..
b. Imperfect Market:
A market is said to be imperfect when
i. Products are similar but not identical.
ii. Prices are not uniform.
iii. There is lack of communication. Etc
IV. On the Basis of Transaction
i. Spot Market:
In such markets, goods are exchanged and the physical delivery of goods takes place immediately.
ii. Future Market:
In such markets, contracts are made over the price for future delivery. The dealing and settlement take
place on different dates.
V. On the Basis of Regulation
i. Regulated Market:
These are types of markets which are organised, controlled and regulated by statutory measures.
ii. Unregulated Market:
A market which is not regulated by statutory measures is called unregulated market. This is a free market,
Demand and supply determine the price of goods.
VI. On the Basis of Time
i. Very Short Period Market:
 Markets which deal in perishable goods like, fruits, milk, vegetables etc.,
 There is no change in the supply of goods. Price is determined on the basis of demand.
ii. Short Period Market:
 In certain goods, supply is adjusted to meet the demand. The demand is greater than supply.
iii. Long Period Market:
 This type of market deals in durable goods, where the goods and services are dealt for longer period
usages.
VII. On the Basis of Volume of Business
i. Wholesale Market:
In wholesale market goods are supplied in bulk quantity to dealers/retailers. The goods and services are
not sold to customers directly.
ii. Retail Market:
In retail market the goods are purchased from producer or wholesales and sold to customers in small
quantities by retailers.
VIII. On the Basis of Importance
i. Primary Market:
The Primary producers of farm sell their output or products through this type of markets to wholesalers
or consumers.
ii. Secondary Market:
In this market, the semi finished goods are marketed. Here finished goods are not sold. The commodities
arrive from other markets.

D.Chithambararaj
PGT Commerce
iii. Terminal Market:
47
It is a central site that serves as an assembly and trading place for commodities in a metropolitan area.
For agricultural commodities, these are usually at or near major transportation hubs.

2. How the market can be classified on the basis of Economics?

a. Perfect Market: A market is said to be a perfect market, if it satisfies the following conditions:
i. Large number of buyers and sellers are there.
ii. Prices should be uniform throughout the market.
iii. Buyers and sellers have a perfect knowledge of market.
iv. Goods can be moved from one place to another without restrictions.
v. The goods are identical or homogenous.
It should be remembered that such types of markets are rarely found.
b. Imperfect Market: A market is said to be imperfect when
i. Products are similar but not identical.
ii. Prices are not uniform.
iii. There is lack of communication.
iv. There are restrictions on the movement of goods.

3. What is your contribution to promote the market in the modern society?

Marketing is more than just an advertising campaign; it should result in revenue for your business.
Understanding the different ways to promote your product or service can help you make the right choice for
your business.
PRINT AND GRAPHIC ARTS MEDIA
 Brochures, posters and packaging: are a cost effective way to provide a variety of messages and detailed
information about your products and services.
 Business cards: can be used to support your networking activities and give potential customers the
information they need to contact you.
 Local newspaper advertising: is a way to reach people in your community and repeatedly exposes them
to your message in order to create a stronger local presence for your business.
 Magazines: have the advantage of targeting a more specific audience of subscribers who are interested in
the topics it covers.
ELECTRONIC MEDIA
 Television: content captures more audience time than any other media and is targeted at home
audiences.
 Radio: is cost effective, and the audience is usually loyal to a station's program format.
 The internet: offers you a variety of different ways to market your product or service on a website or by
email.
 Cell phones and smartphones: allow for marketing tactics that let you reach customers directly on their
mobile devices.
 Social media: marketing encourages online interaction between your customers and your business using
various social networking sites.

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PGT Commerce
 48

Chapter 14: MARKETING AND MARKETING MIX

I. Very Short Answer Questions:

1. Define Marketing Mix.
“Marketing mix is a pack of four sets of variables namely product variable, price variable, promotion variable,
and place variable”.
- Mr. Jerome McCarthy
2. Give any two internal factors affecting the price of product / service.
*Marketing Objectives *Marketing Mix Strategy *Organizational considerations
*Costs *Organization Objectives

3. Define Product.
“A product is anything that can be offered to a market for attention, acquisition, use or consumption that might
satisfy a want or a need’’, - Philip Kotler.

II. Short Answer Questions:

1. What are the objectives of marketing?
 To develop the marketing field.
 To develop guiding policies and their implementation for a good result.
 To suggest solutions by studying the problems relating to marketing.
 To find sources for further information concerning the market problems.
 To take appropriate actions in the course of action.

2. What is need for market and explain the concept of marketing?

Need for Market:
 To exchange (barter) goods and services.
 To adjust demand and supply by price mechanism.
 To improve the quality of life of the society.
 To introduce new modes of life.
Concept of marketing:
 Make What You Can Sell, But Do Not Try To Sell What You Can Make
 First Create A Customer, Then Create Products
 Love your customers and not the products
 Customer is supreme or king
 Customer’s preferences shape your decisions

3. What are the factors affecting Price of Product?

a. Internal Factors: b. External Factors:
1. Marketing Objectives 1. The market and demand
2. Marketing Mix Strategy 2. Competition
3. Organizational considerations 3. Customers
4. Costs 4. Suppliers
5. Organization Objectives 5. Legal factors & Regulatory factors

4. What do you mean by marketing mix? Describe any two elements.

 Marketing mix means a marketing programme that is offered by a firm to its target consumers to earn
profits through satisfaction of their wants.
 Such a marketing programme is a mixture of four ingredients, namely Product mix, Price mix, Place
(Distribution) mix and Promotion mix.

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PGT Commerce
 www.nammakalvi.in
49
Two elements:
i. Product
Product is the main element of marketing. Without a product, there can be no marketing.
ii. Price
Price is the value of a product expressed in monetary terms. It is the amount charged for the product.

III. Long Answer Questions:

1. Discuss about the Evolution of marketing.
i. Barter System:
The goods are exchanged against goods, without any other medium of exchange, like money.
ii. Production Orientation:
This was a stage where producers, instead of being concerned with the consumer preferences,
concentrated on the mass production of goods for the purpose of profit.
iii. Sales Orientation:
The stage witnessed major changes in all the spheres of economic life. The selling became the dominant
factor, without any efforts for the satisfaction of the consumer needs.
iv. Marketing Orientation:
 Customers’ importance was realised but only as a means of disposing of goods produced.
 Competition became more stiff. Aggressive advertising, personal selling, large scale sales
promotion etc. are used as tools to boost sales.
v. Consumer Orientation:
Under this stage only such products are brought forward to the markets which are capable of satisfying
the tastes, preferences and expectations of the consumer satisfaction.
vi. Management Orientation:
The marketing function assumes a managerial role to co-ordinate all interactions of business activities
with the objective of planning, promoting and distributing want-satisfying products and services to the present
and potential customers

2. Why the marketing is important to the society and individual firm? Explain.
a) To the Society
 Marketing is a connecting link between the consumer and the producer.
 Marketing helps in increasing the living standard of people.
 Marketing helps to increase the nation’s income.
 Marketing process increases employment opportunities.
 Marketing creates modern cultivators.
 Marketing includes all activities in the creation of utilities-form, place, time and possession.
 A reduction in the cost of marketing is a direct benefit to society.
 Marketing helps to maintain economic stability and rapid development in underdeveloped or
developing countries.
 Marketing adds value of goods by changing their ownership and by changing their time and place
of consumption.
b) To the Individual Firms
 Marketing generates revenue to firms.
 Marketing section of a firm is the source of information to the top management for taking overall
decisions on production.
 Marketing and innovation are the two basic functions of all businesses. The world is dynamic.
 Marketing facilities the development of business and creates employment opportunities for
people.

D.Chithambararaj
PGT Commerce
3. Narrate the Elements of Marketing mix.
50
i. Product
 Product is the main element of marketing.
 Without a product, there can be no marketing.
 “A product is anything that can be offered to a market for attention, acquisition, use or
consumption that might satisfy a want or a need’’ -Philip Kotler.
ii. Price
 Price is the value of a product expressed in monetary terms.
 It is the amount charged for the product.
 Price is the amount of money charged for a product or service, or the sum of the values that
consumers exchange for the benefits of having or using the product or service”. Philip Kotler
iii. Place (Physical Distribution)
 The fourth element of product mix, namely place or physical distribution facilitates the movement
of products from the place of manufacture to the place of consumption at the right time.
iv. Promotion
 An excellent product with competitive price cannot achieve a desired success and acceptance in
market, unless and until its special features and benefits are conveyed effectively to the potential
consumers.

4. What is Marketing?
 Marketing is the performance of buying activities that facilitate to more flow of goods and
services from producer to ultimate user
 Selling is basically concerned with putting the goods into the hands of the buyers for a price, but
marketing is much wider than selling.
 “Marketing is what a marketer does”
 The evolution of marketing is as old as the Himalayas. It is one of the oldest professions in the
world.
 The traditional objective of marketing had been to make the goods available at places where they
are needed.
 This idea was later on changed by shifting the emphasis from “exchange” to “satisfaction of
human wants”.
 Some emphasise on the traditional view of producing goods and finding out customers
 modern view that marketing must first find out what customers want and then plan a product to
satisfy the wants.

5. State the advantages of warehousing.

Protection and Preservation of goods :
 Warehouse provides necessary facilities to the businessmen for storing their goods when they are
not required for sale.
Regular flow of goods :
 Many commodities like rice, wheat etc. are produced during a particular season but are consumed
throughout the year. Warehousing ensures regular supply of such seasonal commodities
throughout the year.
Continuity in production :
 Warehouse enables the manufacturers to carry on production continuously without bothering
about the storage of raw materials.
Convenient location :
 Warehouses are generally located at convenient places near road, rail or waterways to facilitate
movement of goods. Convenient location reduces the cost of transportation.
Creation of employment :
 Warehouses create employment opportunities both for skilled and unskilled workers in every part
of the country. It is a source of income for the people, to improve their standards of living.

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 51

6. How market information is helpful to invention of new product in the market?

1. It is crucial for a better understanding of your customers

 Who will buy your product? How often will they buy? What do they need? What do they want,
expect?
 This will result directly in meeting the customer’s needs better than your competitors.
2. Knowledge about your competitors, and how they approach the market
 Market information will help assess the market to identify both key players and those on the rise.
 Furthermore, it will help you find the weaknesses in your competitor’s approach.
3. Testing your product before launch
 Every business decision should be tested before fully exposing to your target audience.
 With market research, you find out what approach you should take when marketing the product
4. You won’t go out of business
 In order to remain in business and stay relevant, you should not only anticipate change, but you
need to be able to predict change too
5. Business growth
 The process of market research itself is designed to reduce the risk and to make the marketing
strategy cost-effective for your business.

D.Chithambararaj
PGT Commerce
 www.nammakalvi.in
52
CHAPTER 15: RECENT TRENDS IN MARKETING
I.Very Short Answer Questions:
1.What is E business?
 If all the business transaction carried out through internet and other online tools is called E-business.
 Electronic business (e-business) via, web, internet, intranets, extranets or some combination thereof to
conduct business.
2.What is green marketing?
Green marketing involves developing and promoting products and services which satisfy customers’
wants and needs for quality, performance, affordable pricing and convenience – all without causing a
detrimental impact on the environment.
3.What is service marketing?
A service is any activity or benefit that one party can offer to another which is essentially intangible and
which does not result in the ownership of anything like business and professional services insurance, legal
service, medical service etc.
4.Define E-Marketing.
“E-Marketing is achieving marketing objectives through use of digital technologies like Internet, word
wide web, email, wireless media, and management of digital customer data and electronic customer
management systems (E-CRM)” -Judy Strauss
5.What is E-Tailing?
 E-tailing or electronic retailing refers to selling of goods and services through a shopping website
(internet) or through virtual store to the ultimate consumer.
 The customer receives the product at their preferred address through courier service.
6.What is Social marketing?
 Social marketing is a new marketing tool. It is the systematic application of marketing philosophy and
techniques to achieve specific behavioural goals which ensure social good.
 Example, Asking people not to smoke in public areas

II.Short Answer Questions:

1.What is B2B and B2C type of E-Commerce?
B2B (Business to Business):
 B2B e-Commerce is an online business model that facilitates online sales transactions between two
businesses.
 For example, an online retailer that sells office furniture is a B2B business because its primary target
market is other businesses
B2C (Business to Customer):
 B2C e-Commerce refers to the process of selling to individual customers directly.
 An example of a B2C transaction would be someone buying a pair of shoes online
2.Explain the importance of social marketing.
 The primary aim of social marketing is ‘social good’ such as anti-tobacco, anti-drug, anti-pollution, anti-
dowry, road safety, protection of girl child, against the use of plastic bags.
 Social marketing promotes the consumption of socially desirable products and develops health
consciousness.
 It helps to eradicate social evils that affect the society and quality of life
3.Discuss the objectives E-Marketing
The following are the objectives of E-Marketing
1. Expansion of market share
2. Reduction of distribution and promotional expenses.
3. Achieving higher brand awareness.
4. Strengthening database.

D.Chithambararaj
PGT Commerce
4.Elucidate how E-Commerce differs from E-Business.
53
 E-commerce simply refers to the buying and selling of products and services through online
 But E-business goes a way beyond the simple buying and selling, of goods and service and much wider
range of business processes, such as supply chain management, electronic order processing and
customer relationship management.
 E-Commerce and E-Business is used interchangeably in its broader meaning just as commerce and
business.
5.Explain in detail about Niche marketing.
 Niche marketing denotes a strategy of directing all marketing efforts towards one well defined segment
of the population.
 A niche market does not mean a small market, but it involves specific target audience with a specialized
offering.
 The sports channels like STAR Sports, ESPN, STAR Cricket and Fox Sports target the niche market of sports
enthusiasts.
III.Long Answer Questions:
1.Explain in detail how traditional marketing differ from E-marketing
E-Marketing Traditional Marketing

It is very economical and faster way to promote the
products.
It is quiet easier for promoting product globally in the
short time.
E-Business enterprises can expand their operation with
minimum manpower.
In this marketing product can be sold or bought 24 x 7,
round the year with minimum manpower
It is very expensive and takes more time to promote
product.
It is very expensive and time consuming to promote
product/ service under traditional marketing.
It needs more man power.
That is not possible in traditional marketing.

2.Explain advantages and disadvantages of E-tailing.

Advantages:
1. Cost:
 E-tailware software helped retailers in updating the information against competition & avoids the
expenses by creating online catalogues instead of paper catalogue.
2. Global bazaar:
 E-tailing creates a global bazaar style marketplace that gathers many consumers and many retailers.
3. Access (no physical location):
 Travelling is not required to see and compare products since all information about the products are
available online.
4. Inventory:
 Inventory of the products can be placed in larger quantity with all ranges available with a particular
retailer without worrying about the space limitation and shelve availability for that product.
5. Flexible time:
 Time flexibility in accessing the shop is a significant advantage of e-tailing. A customer can access the
shop 24/7 according to their need and comfort.

Disadvantages:
1. Personal information:
 While shopping through the online media, consumers are confronted with a lot of security issues.
2. Technical issues:
 The other major concerns are related to technical problems like security and confidentiality of
information, speed of access, etc
3. Mode of payment related issues:
 Credit cards are the preferred mode of payment for all online purchases. There is always a possibility of
misuse of the card details as the e-tailers cannot capture any signatures of the cardholder.
D.Chithambararaj
PGT Commerce
4. Customer service, distribution and logistics related issues:
54
 It is evident that e-tailing facilitates business transactions but care should be taken to ensure that the
products are delivered on time.
5. Shopping is still a touch-feel-see-hear experience:
 Indian shoppers want to touch, feel and examine the product before they buy it.

3. Describe the various strategies pursued in recent day’s marketers.

E-Tailing:
 E-tailing or electronic retailing refers to selling of goods and services through a shopping website
(internet) or through virtual store to the ultimate consumer.
 The customer receives the product at their preferred address through courier service.
Niche marketing.
 Niche marketing denotes a strategy of directing all marketing efforts towards one well defined segment
of the population.
 A niche market does not mean a small market, but it involves specific target audience with a specialized
offering.
 The sports channels like STAR Sports, ESPN, STAR Cricket and Fox Sports target the niche market of sports
enthusiasts.
Green marketing:
 Green marketing involves developing and promoting products and services which satisfy customers’
wants and needs for quality, performance, affordable pricing and convenience – all without causing a
detrimental impact on the environment.
Social marketing:
 Social marketing is a new marketing tool. It is the systematic application of marketing philosophy and
techniques to achieve specific behavioural goals which ensure social good.
 Example, Asking people not to smoke in public areas
Multilevel Marketing:
 Multilevel Marketing is the marketing strategy wherein the direct sales companies encourage its existing
distributors to recruit new distributors to facilitate the sale of goods and services.

4. Compare the concept of social marketing with service marketing.

Social marketing:
 Social marketing is a new marketing tool.
 It is the systematic application of marketing philosophy and techniques to achieve specific behavioural
goals which ensure social good.
 The primary aim of social marketing is ‘social good’ such as anti-tobacco, anti-drug, anti-pollution, anti-
dowry, road safety, protection of girl child, against the use of plastic bags.
 Social marketing promotes the consumption of socially desirable products and develops health
consciousness.
 It helps to eradicate social evils that affect the society and quality of life
Service marketing:
 A service is any activity or benefit that one party can offer to another which is essentially intangible and
which does not result in the ownership of anything like business and professional services insurance, legal
service, medical service etc.
 Service marketing is a specialized branch of marketing. Service marketing denotes the processing of
selling service goods like telecommunication, banking, insurance, car rentals, healthcare, tourism,
professional services, repairs etc.,
 The service products are mostly intangible, inseparable from service provider and service variable
depending on the mood swing of service providers perishable in quick time, unstandardisable and
deliverable directly from service provider without inter-median.

D.Chithambararaj
PGT Commerce
 www.nammakalvi.in
55
5. Disscuss any two new methods of marketing with it's advantages.
Viral marketing :
Viral Marketing is that which is able to generate interest and the potential sale of a brand or product
through messages that spread like a virus, in other words, quickly, and from person to person. The idea is for it to
be the users themselves that choose to share the content.
Low cost:
What characterizes viral campaigns is that the users do a significant part of the work for us, which
drastically cuts down the costs of dispersion: it becomes unnecessary to buy advertising or space on the media.
Potential of great reach:
A viral video on the Internet has the ability to reach a huge international audience without us having to
invest money or make any extra effort.
It is not invasive:
In viral marketing, the decision to participate and share always comes from the user, and so it never
comes across as invasive.
It helps build up your brand:
we are creating content so incredible that users themselves decide to share it and, hence create a
personal connection with your brand. It is without a doubt an extremely powerful tool when it comes to
branding and awareness.

Niche Marketing:
Niche marketing denotes a strategy of directing all marketing efforts towards one well defined segment
of the population. A niche market does not mean a small market, but it involves specific target audience with a
specialized offering.
Less competition :
Unlike in generalized marketing where market competition is still, niche marketing has quite less
competition for the viable customers purchasing the products.
Brand loyalty :
Niche marketing makes it possible for businesses to build their brand loyalty. This marketing approach
lets you provide customers with products and services they need and desire.
Best for giving marketing insight:
Once you begin to concentrate fully on niche marketing, you will learn about new products, innovations
and ideas about the market
Wide Reach:
With this approach, you will be able to reach a larger percentage of people who are more likely to use
your services or purchase your products.

***************************************************************************

D.Chithambararaj
PGT Commerce
 56
CHAPTER 16: CONSUMERISM
I.Very Short Answer Questions:
1. Who is a consumer?
A consumer is one who consumes goods manufactured and sold by others or created (air, water, natural
resources) by nature and sold by others. One, who avails services such as banking, transport, insurance, etc., is
also called a consumer.
2. Define Consumerism.
“Consumerism is an attempt to enhance the rights and powers by buyers in relation to sellers”
-L. Massie
3. Give two examples of adulteration.
 Mixing of stones with grains
 Mixing of coconut oil with palmolein
 Papayas seed is added to black pepper
4. What is Caveat Emptor?
 ‘Caveat emptor’ is a Latin term that means "let the buyer beware."
 the principle of caveat emptor serves as a warning to the buyers that they have no recourse with the
seller if the product does not meet their expectations
5. What is Caveat Venditor?
 The principle of caveat venditor, which means "let the seller beware," by which goods are covered by an
implied warranty of merchantability.
 Sellers assume much more responsibility for the integrity of their goods in the present day.
6. Write a short notes on Consumer Protection Act, 1986.
 The Act is referred in short as ‘COPRA’.
 The Consumer Protection Act 1986 seeks to protect and promote the interests of consumers.
 The act provides safeguards to consumers against defective goods, deficient services, unfair trade
practices, and other forms of their exploitation.

II.Short Answer Questions:

1. Which are the three constituent elements of business?
 The producer, the consumer and the government are the three constituent elements of business. The
consumer is the most exploited constituent in the business world.
2. What are the important legislations related to consumerism in India?
 The Indian Contract Act, 1982 was passed to bind the people on the promise made in the contract.
 The Agricultural Products Grading and Marketing Act, 1937 ensures the supply of agricultural
commodities at high quality.
 The Trademark Act, 1999 prevents the use of fraudulent marks on the product.
 The Competition Act, 2002 protects the consumers against unhealthy competition.
3. What is meant by artificial scarcity?
 There are certain situations where the shop-keepers put up the board ‘No Stock” in front of their shops,
even though there is plenty of stock in the store.
 In such situations consumers who are desperate to buy such goods have to pay high price to buy those
goods and thus earning more profit unconscientiously.
 Even in Cinema houses, board may hang in the main entrance ‘House Full’ while cinema tickets will be
freely available at a higher price in the black market.
4. Write the importance of consumerism.
 Awakening and uniting consumers.
 Discouraging unfair trade practices.
 Protecting against exploitation.
 Awakening the government.
 Effective implementation of consumer protection laws.
 Providing complete and latest information.

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PGT Commerce
 57
5. What is the role of Government in consumer protection?
 Since most of consumers including academically educated are illiterate about their rights and hence
passive. Government should assure an active role in safeguarding the consumers.
 Government both the central and the state have brought out a number of legislations to protect the
interest of consumers across the country.

III. Long Answer Questions:

1. How consumers are exploited?
1. Selling at Higher Price
The price charged by the seller for a product service may not be matching with the quality but at times it
is more than the fair price.
2. Adulteration
It refers to mixing or substituting undesirable material in food. This causes heavy loss to the consumers.
This will lead to monitory loss and spoil the health.
3. Duplicate or Spurious goods
Duplicates are available in plenty in the market for every original and genuine parts or components like
automobile spare parts, blades, pens, watches, radios, medicines, jewellery, clothes and even for currency notes.
4. Sub-standard
On opening a packet or sealed container one may find the content to be of poor quality. a consumer finds
it difficult to exchange the defective one for good one. Some seller give bills which contain a stipulation that
goods sold cannot be taken back.
5. Warranty and Services
Warranty service may not be extended to many parts/components of the product sold. Thus consumers
may be charged exorbitant charges in the name of repair costs.
6. False Advertisements
Advertisements convey very little information about the product. Many times it makes false
representation about the quality, price, grade, composition, utility guaranteed, performance etc.

2. Explain the role of business in consumer protection.

1. Avoidance of Price Hike
Business enterprises should stop from hiking the price in the context of critical shortage of goods /articles.
2. Avoidance of Hoarding
Business enterprises should allow the business to flow normally. It should not indulge in hoarding and black
marketing to earn maximum possible profit in the short term at the cost of consumers.
3. Guarantees for Good Quality
Business enterprises should not give false warranty for the products. It should ensure supply of good quality.
4. Product Information
Business enterprises should disclose correct, complete and accurate information about the product viz. size,
quality, quantity, substances, use, side effects, precautions, weight, exchange, mode of application etc.
5. Truth in advertising
Business enterprises should not convey false, untrue, bogus information relating to the product through the
advertisements in media and thus mislead the consumers.
6. Consumer Grievances
Where the business enterprises have customer care department, it should handle the grievances’ of consumer
immediately or within a definite time frame.

D.Chithambararaj
PGT Commerce
 www.nammakalvi.in
3. What are the needs for consumer protection?
58
 Though consumer is said to be the king of entire business sphere, his interests are virtually neglected.
 Shortage of goods makes the consumers to be content with whatever is offered for sale.
 Quality is sacrificed: warranty of performance has no meaning; health hazard is never considered; profit
maximisation turns out to be sole consideration of business enterprises.
 The other and highly injurious practice by the suppliers, especially in India, is widespread practice of
adulteration of commodities.
 For instance, in case of drugs manufacturers generally charge high prices which are much above their cost
of production. Some pharmaceutical companies misuse their patent rights to exploit consumers.
 The cost of advertisement is added to the cost of production and this leads to very high prices being
charged from the consumers
 Misleading advertising is another means by which the producers deceive the consumers
 It is due to the above practices of the manufacturers and suppliers which have resulted in consumer
protection movement and have forced the governments to enact legislation to protect the consumers.

4. Explain the role of consumers in Consumer Protection..

 Ultimately it is the consumer who alone can put an end to all their unethical trade practices.
 Business enterprises may break the codes and Government may rest content with mere enaction of laws
and do little to protect consumers.
 In this context consumers have to be vigilant and organise themselves into a movement for concerted
action.
Activation of Consumer Action Councils
 Consumer action councils established at village levels should educate consumers of the right.
 Consumer protection agencies should take necessary steps to investigate consumer complaints and
grievances and arrange to forward them to correct forum.
 It should regulate business enterprises according to the rules of the industry.
 Voluntary consumer groups should provide information so as to educate consumers on matters affecting
them through media.
 It should organise movement against the malpractice of manufacturers and traders.
 Consumer cooperatives need to be strengthened.
 Consumer groups should contact the legislators to raise the consumer issues in Assembly and Parliament.
 There should be testing laboratories a teach district to test the purity of goods.
 Voluntary consumer organisations should publicise the malpractices of manufacturers and traders by
media.

5. What are the objectives of Consumer Protection Act, 1986?

 Protection of consumers against marketing of goods which are hazardous and dangerous to life and
property of consumers.
 Providing correct and complete information about quality, quantity,purity, price and standard of goods
purchased by consumers.
 Protecting consumers from unfair trade practices of traders.
 Empowering consumers to seek redressal against exploitation
 Educating the consumer of their rights and duties
 Ensuring better standard of living for consumers by providing them with quality products at fair price.
 Putting in place right mechanism like councils and other authorities to enable the consumers to enforce
their rights.

D.Chithambararaj
PGT Commerce
 59
6. Write about five important consumer legislations.
1. The Indian Contract Act, 1982 was passed to bind the people on the promise made in the contract.
2. The Agricultural Products Grading and Marketing Act, 1937 ensures the supply of agricultural
commodities at high quality.
3. The Prevention of Food Adulteration Act, 1954 checks the adulteration of food articles and ensures
purity of goods supplied and thus protects the health of consumers.
4. The Trademark Act, 1999 prevents the use of fraudulent marks on the product.
5. The Competition Act, 2002 protects the consumers against unhealthy competition.
6. The Drugs and Cosmetics Act, 1940 ensures the safety of drugs and cosmetics sold in India.
7. The Food Safety Standard Act, 2006 regulates the manufacture, storage, and distribution of food in safe
and wholesome condition to consumers.

7. What are the salient features of the Consumer Protection Act, 1986?
 Protecting consumers against products and services which are harmful to the health of
consumers.
 Protecting consumers from the breach of contract by sellers /manufacturers.
 Ensuring consumers with supply of goods at fair quality.
 Safeguarding consumers against misleading and untrue messages communicated through
advertisement.
 Ensuring that consumers are charged fair price.
 Ensuring uninterrupted supply of goods.
 Ensuring the availability of goods incorrect quantity and right size.
 Protecting the consumers against unfair trade practices of unscrupulous trader
 Protecting the consumers against pollution of various kinds
 Protecting consumers against the evil effect of competition.

8. What are the objectives of United Nations guidelines for consumer protection?
 To assist countries in achieving or maintaining adequate protection for their population as
consumers
 To facilitate production and distribution patterns responsive to the needs and desires of
consumers
 To encourage high levels of ethical conduct for those engaged in the production and distribution
of goods and services to consumers
 To assist countries in curbing abusive business practices by all enterprises at the national and
international levels which adversely affect consumers
 To facilitate the developing of independent consumer groups
 To further international co-operation in the field of consumer protection
 To encourage the development of market conditions which provide consumers with greater
choice at lower prices

D.Chithambararaj
PGT Commerce
 60
CHAPTER 17: CONSUMER PROTECTION

I. Very Short Answer Questions:

1. Write short notes on: “Right to be informed.”
 Consumers should be given all the relevant facts about the product so that they can take intelligent
decisions on purchasing the product.
 The package should contain the full details about the name of the product, composition, dosage, date of
manufacturing, date of expiry, batch number, warnings, antidote etc.
 Manufacturer and the dealer are expected to disclose all the material facts relevant and relating to the
product.
2. What do you understand about “Right to Safety”?
The consumers are entitled to protection of their health and safety from the goods and services they buy.
They should not be supplied goods or services which are hazardous to their health and safety.
3. What are the rights of consumer according to John F. Kennedy?
The former president of U.S.A Mr. John F. Kennedy defined the basic consumer rights as “The Right of
Safety, the Right to be informed, the Right to choose and the Right to be heard.”
4. Which is the supreme objective of business?
 The modern marketing concept recognises that the consumer is the pivotal point around which the
business moves.
 Satisfaction of consumer needs/requirements is stated to be supreme objective of a business.
5. What are the important aspects to be kept in mind by consumer while purchasing goods related to the
quality of goods?
 It is the responsibility of a consumer to purchase a product after gaining a thorough knowledge of its
price, quality and other terms and conditions.
 The consumer should enquire about the price from certain shops and if possible from government stores
to get an idea of its price.

II. Short Answer Questions:

1. What do you understand by “Right to redressal”.
 The complaints and protests are not just to be heard: but the aggrieved party is to be granted
compensation within a reasonable time period.
 There should be prompt settlement of complaints and claims lodged by the aggrieved customers.
 This will boost consumer confidence and help render justice to buyers.
 There should be fair settlement of deserving claims in a definite timeframe.
2. Define “Consumer Rights”.
Consumer Protection Act, 1986. According to this law, everybody including individuals, a firm, a Hindu
undivided family and a company, has the right towards the purchase of goods made by them. It is the significant
that, as a consumer, everyone should know the basic rights as well as about the courts and procedures that
follow with the infringement of one’s rights.
3. What do you understand about” Right to protection of health and safety”.
 There may be few products that are more likely to cause physical danger to consumers’ health, lives and
property.
 They may contain potentially harmful substances which are dangerous from the consumer welfare point
of view. The health hazards which are likely to arise have to be eradicated or reduced altogether.
 The consumers are entitled to protection of their health and safety from the goods and services they buy.
They should not be supplied goods or services which are hazardous to their health and safety.

D.Chithambararaj
PGT Commerce
 www.nammakalvi.in
III. Long Answer Questions:
61
1. What are the rights of consumers?
Right to protection of health and safety:
 There may be few products that are more likely to cause physical danger to consumers’ health, lives and
property.
 The consumers are entitled to protection of their health and safety from the goods and services they buy.
They should not be supplied goods or services which are hazardous to their health and safety.
Right to be informed:
 Consumers should be given all the relevant facts about the product so that they can take intelligent
decisions on purchasing the product.
 The package should contain the full details about the name of the product, composition, dosage, date of
manufacturing, date of expiry, batch number, warnings, antidote etc.
Right to redressal:
 The complaints and protests are not just to be heard: but the aggrieved party is to be granted
compensation within a reasonable time period.
 There should be prompt settlement of complaints and claims lodged by the aggrieved customers.
Right to Consumer Education:
 The consumer has a right to acquire knowledge and stay well-informed all through his life.
 He should be aware about his rights and the reliefs granted to him where a product or service falls short
of his expectations.
Right to Basic Needs:
 Every consumer has a right to get basic necessities of life such as food, clothing and water, and right to
pure and healthy environment. It is the latest addition to consumer bill of rights.
Right to Consumer Protection:
 The consumer has a right to be aware of his rights and remedies available to him, redress his grievances
through publicity in the mass media.
 Consumer has a right to be protected against goods and services which are hazardous to life and health.

2. Explain the duties of consumers.

Buying Quality Products at Reasonable Price:
 It is the responsibility of a consumer to purchase a product after gaining a thorough knowledge of its
price, quality and other terms and conditions.
 The consumer should enquire about the price from certain shops and if possible from government stores
to get an idea of its price.
Ensure the Weights and Measurement before Making Purchases:
 The sellers often cheat consumer by using unfair weights and measures.
 The consumer should ensure that he/she is getting the product of exact weight and measure. Consumer
should check the weights and balance of the product.
Reading the Label Carefully:
 It is the duty of the consumer to thoroughly read the label of the product. It should have correct,
complete and true information about the product.
Beware of False and Attractive Advertisements:
 Often the products are not as attractive as shown in the advertisement by the sellers. Hence, it is the
prime duty of consumer not to get misled by such fraudulent advertisements.
Ensuring the Receipt of Cash Bill:
 It is a legitimate duty of consumers to collect cash receipt and warranty card supplied along with bills.
This will help them in seeking redressal for their grievances.
Buying from Reputed Shops:
 It is advisable for the consumer to make purchase from the reputed shops or government shops like
super bazaar, cooperative stores, and the like.

D.Chithambararaj
PGT Commerce
3. What are the responsibilities of consumers?
62
1. The consumer must pay the price of the goods according to the terms and conditions of the sales contract.
2. The consumer has got a responsibility to apply to the seller for the delivery of the goods. He/she has to take
delivery of the goods in time.
3. The consumer has to bear any loss, which may arise to the seller when the consumer delays taking delivery of
the goods as per the terms of contract.
4. The consumer is bound to pay any interest and special damages caused to the seller incase if there is delay in
the payment.
5. The consumer has to assiduously follow and keenly observe the instructions and precautions while using the
products.
6. The consumer has the responsibility to express unambiguously to the seller of his requirements and
expectations from the product.
7. The consumer must seek to collect complete information about the quality, quantity,price etc of the product
before purchasing it.
8. The consumer must get cash receipt as a proof of goods purchased from the seller.
9. The consumer must file a complaint with the seller concerned about defects or short comings noticed in their
products and services.
10. The consumer should never compromise on the quality of goods. The consumers must watch for ISI, Agmark,
FPO, the standard quality certification marks and the like in the label.

*****************************************************************************************

D.Chithambararaj
PGT Commerce
 63
CHAPTER 18: GRIEVANCE REDRESSAL MECHANISM

I. Very Short Answer Questions:

1. What do you meant by Redressal Mechanism?
 Grievance Redressal is a management and governance related process used commonly in India.
 While the term "Grievance Redressal" primarily covers the receipt and processing of complaints from
citizens and consumers
 A wider definition includes actions taken on any issue raised by them to avail services more effectively.
2. What do you know about National Commission?
 National Commission is a quasi-judicial commission in India which was set up in 1988 under the
Consumer Protection Act of 1986.
 Its head office is in New Delhi. The Commission is headed by a serving or retired judge of the Supreme
Court of India.
3. State the meaning of the term State Commission.
 A consumer has to be protected against defects, deficiencies and unfair and restrictive trade practices.
 The State Consumer Protection Council is also called State Commission.
 The State Commission is to be appointed by the State Government function as state level.
4. What is a term District Forum?
 As per the Consumer Protection Act of 1986 the establishment of a District Forum by the State
Government in each district is necessary today to protect the interest of aggrieved consumers in that
district.
 The State Government can establish more than one District Forum in a district if it deems fit to do so.
5. How to register the complaints?
1. Complaint can be registered within 2 years from the date on which the cause of action has arisen, to
the date on which the completion from the deficiency in service.
2. Stamp paper is not required for declaration
3. Complaint can be registered, in person, by the complainant or through his authorised agent or by post
addressed to the Redressal Agency.
4. Advocates are not necessary.

II. Short Answer Questions:

1. Is Consumer Protection necessary?
Yes, it’s necessary for the following reasons..
 We need physical protection of the consumer, for example protection against products that are unsafe or
dangerous to his health and welfare.
 Consumers want protection against deceptive and unfair trade and market practices.
 Consumers protection is needed against all types of pollution so that they can enjoy a healthy
environment-free from water, air and food pollution
2. Who are the members of the National Commission?
1. The National Commission should have five members.
2. One should be from judiciary.
3. Four other members of ability, knowledge and experience from any other fields.
4. It should include a woman.
3. What is the Pecuniary Jurisdiction of the State Commission?
1. The State Commission can entertain complaints within the territory of entire state and where the value
of the goods or services and the compensation, if any claimed exceed Rs. 20 lakhs and below Rupees One Crore.
2. The State Commission also has the jurisdiction to entertain appeals against the orders of any District
Forum within the State.

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PGT Commerce
 www.nammakalvi.in
4. Does District Forum exceeds the claim limit of Rs 20 lakhs. Explain the condition.
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 If the value of the complaint exceeds this limit of Rs 20 Lakhs the complaint should be made direct to the
State Commission.
 Further the District Forum also may pass orders against traders indulging in unfair trade practices, sales of
defective goods or rendering deficient services, the turnover of goods or value of services does not
exceed Rs 20 Lakhs.
5. Write a note on the Voluntary Consumer Organisation.
Consumer is a broad label for any individuals or households that use goods and services produced within
the economy. Voluntary consumer organisations refer to the organisation formed voluntarily by the consumers
to protect their rights and interests
III. Long Answer Questions:
1. What are the Functions of the National Commission?
 National Commission is a quasi-judicial commission in India which was set up in 1988 under the
Consumer Protection Act of 1986.
 Its head office is in New Delhi. The Commission is headed by a serving or retired judge of the Supreme
Court of India.
Members:
1. The National Commission should have five members.
2. One should be from judiciary.
3. Four other members of ability, knowledge and experience from any other fields.
4. It should include a woman.
Jurisdiction
Section 21 of The Consumer Protection Act, 1986 describes, the National Commission shall have jurisdiction
1. To entertain a complaint valued more than 1 Crore.
2. Revised the orders of State Commissions.
3. To call for the records and pass appropriate orders from the State Commission and District Forum.

2. Explain the overall performance of State Commission.

 A consumer has to be protected against defects, deficiencies and unfair and restrictive trade practices.
 The State Consumer Protection Council is also called State Commission.
 The State Commission is to be appointed by the State Government function as state level.
Members
Each State Commission shall consist of the following members.
1. A person who is or has been a Judge of a High Court appointed by the State Government as its
President.
2. Two other members who shall be persons of ability, integrity and standing and have adequate
knowledge or experience of or have shown capacity in dealing with problems relating to economics, law,
commerce, industry, public affairs or administration of them, one shall be a woman.
Jurisdiction
 The State Commission can entertain complaints within the territory of entire state and where the value of
the goods or services and the compensation, if any claimed exceed Rs. 20 lakhs and below Rupees One
Crore.
 The State Commission also has the jurisdiction to entertain appeals against the orders of any District
Forum within the State.
Powers:
The following are the powers of the State Commission.
1. The State Commission also has the power to call for the records and pass appropriate orders in any
consumer dispute which is pending before or has been decided by any District Forum within the State.

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PGT Commerce
 2. To produce before and allow to be examined by an officer of any of these agencies,such books of
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accounts, documents or commodities as may be required and to keep such books, documents, etc., under his
custody for the purposes of the Act.
3. To furnish such information that may be required for the purposes of the Act to any officer so
specified.

3. Explain the term District Forum and explain the functions of District Forum.
 As per the Consumer Protection Act of 1986 the establishment of a District Forum by the State
Government in each district is necessary today to protect the interest of aggrieved consumers in that
district.
 The State Government can establish more than one District Forum in a district if it deems fit to do so.
Members
1. A person who is or who has been or is qualified to be, a District Judge as its President.
2. Two other members who shall be persons of ability, integrity and standing and have adequate
knowledge or experience of or who have shown their capacity in dealing with problems relating to economics,
law,commerce, accountancy, industry, public affairs or administration. It is insisted in the Act that out of such
two other members’one shall be a woman.
Jurisdiction
 The District Forum can entertain complaints within the territory of genuine district and where the value
of goods or services and the compensation if any claimed is less than Rs 20 Lakhs.
Powers
 If the value of the complaint exceeds this limit of Rs 20 Lakhs the complaint should be made direct to the
State Commission.
 Further the District Forum also may pass orders against traders indulging in unfair trade practices, sales of
defective goods or rendering deficient services, the turnover of goods or value of services does not
exceed Rs 20 Lakhs.

4. What is Voluntary Consumer Organisations? Explain its Functions.

 Consumer is a broad label for any individuals or households that use goods and services produced within
the economy.
 Voluntary consumer organisations refer to the organisation formed voluntarily by the consumers to
protect their rights and interests.
Objectives
 The primary objective of the Consumer Welfare Fund is to strengthen the Consumer Advocacy Movement
in India.
 Voluntary Consumer Organisation is doing commendable work to raise awareness amongst consumers.
 To strengthen consumer protection and welfare and to provide counselling, guidance and mediation
services.
 Steps have been taken to enhance transparency and to digitalise the government’s interface with its
citizens
Functions
i) Collecting Data on Different Products and testing them
ii) Filing Suit on Behalf of Consumers
iii) Organising Protests against Adulteration etc.
iv) Helping Educational Institutions
v) Promoting Network of Consumer Association
vi) Extending Support to Government

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PGT Commerce
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5. How to create consumer awareness?

I. To publish brochures journals and monographs.
ii. To arrange conferences, seminars and workshops.
iii. To educate consumers to help themselves.
iv. To provide special education to women about consumerism
v. Publish Advertisement regarding consumerism through social media
vi. We have to include consumerism in school curriculum
vii. Create consumer awareness day in a year
viii. Publish awareness documentary film in cinema theatres

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PGT Commerce
 www.nammakalvi.in
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CHAPTER 19: ENVIRONMENTAL FACTORS
I. Very Short Answer Questions:
1. Define Business environment
According to Bayard O ‘Wheeler Business environment is “the total of all things external to firms and
industries which affect their organisation and operations”.
2. What is internal environment?
 Internal environment refers to those factors within an organisation e.g Policies and programmes,
organisational structure, employees, financial and physical resources.
 These factors can be changed or altered and hence are known as controllable factors.
3. Give the meaning of corporate governance.
 Corporate governance is a set of rules and policies which governs a company.
 It provides a frame work for managing a company and achieving its objectives.
 It gives guidelines for internal control, performance measurement and corporate disclosure.
4. What is GST?
 GST is the indirect tax levied on goods and services across the country.
 It is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
 Types of taxes: CGST,SGST,IGST
5. Expand VUCA.
 VUCA – Volatility, Uncertainty, Complexity and Ambiguity,
6. What is mixed economy?
 The nature of economic system the economic systems can be classified as Capitalistic, Socialistic and
Mixed economy.
 Mixed economy is a combination of both state owned and private sector ownership.
II. Short Answer Questions:
1. Explain the natural environment of business.
 Natural factors such as climate, soil, forests, minerals, rivers and ocean have tremendous influence on the
functioning and growth of commerce and industry.
The impact of natural environment of business may be described under the following heads:
 Source of Raw Materials
 Location of Industry
 Employment Generation
 Basis of Transportation and Communication
 Foreign Exchange Earner
2. What are the political environment factors?
 The framework for running a business is given by the political and legal environment.
 The success of a business lies in its ability to adapt and sustain to political and legal changes.
 The legislative, executive and judiciary are the three political institutions which directs and influences a
business
3. Write about any three internal environmental factors of business.
Vision and objectives:
 The vision and objectives of a business guides its operations and strategic decisions.
Management structure:
 The structure of management/board and their style of functioning, the level of professionalism of
management, and the composition of the board are the various factors which affects the decision
making.

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PGT Commerce
Company image:
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 The image of an organisation plays an important role in introducing new products, expanding and
entering new markets both domestic and international, raising finance etc.

4. State the framework of Corporate Governance in India.

i) To have independent directors on the board; at least one third of the directors have to be independent
directors.
ii) To have at least one independent woman director,
iii) To disclose all deals and payments to related parties.
iv) To disclose details of managerial compensation
v) CEO and CFO to sign stating that the governance norms have been complied with in the financial
statements.
5. What are the functions of the GST council?
 Goods & Services Tax Council is a constitutional body for making recommendations to the Union and
State Government on issues related to Goods and Service Tax.
 The Goods and Services Tax Council shall make recommendations to the Union and the States on
 The goods and services that may be subjected to, or exempted from the goods and services tax
 The rates including floor rates with bands of goods and services tax
 Any special rate or rates for a specified period, to raise additional resources during any natural
calamity or disaster
6. Write a note on future environment of business.
 The future environment of business in this age of rapid technological advancement has been captured
Aptly in the acronym VUCA – volatility, uncertainty, complexity and ambiguity, developed in the late 80’s
by the U.S military.
 In a VUCA environment a firm has to be forward looking anticipating the change, adaptability will remain
essential for the success of any business in an ambiguous, uncertain environment.
7. What do you know about Technological environment?
 The development in the IT and telecommunications has created a global market.
 Technology is widely used in conducting market research for understanding the special needs of the
customer.
 Digital and social media are used as a platform for advertising and promoting the products/services.
III. Long Answer Questions:
1. Discuss the role of macro environment of business.
The success of a business is dependent on its ability to adapt to the macro environment, since these
are uncontrollable factors.
i) Economic environment:
The business is an integral part of the economic system prevalent in a nation. It includes
 The nature of economy based on the stage of development.
 The nature of economic system The economic systems can be classified as Capitalistic, Socialistic and
Mixed economy.
 The economic policies of a nation Monetary policy, fiscal policy etc..
 The Economic indices like GDP, GNP national income, et..
ii) Socio-Cultural environment:
 Business is a part of the society. Social environment refers to the sum total of factors of the society in
which the business is located.
 Social and cultural environment of society affects the business.
iii) Political and Legal environment:
 The framework for running a business is given by the political and legal environment.
 The success of a business lies in its ability to adapt and sustain to political and legal changes.
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PGT Commerce
iv) Geo-physical environment:
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The natural, geographical and ecological factors have a bearing on the business. These are as follows;
 the availability of natural resources like minerals oil .etc
 the weather and climatic conditions
 Availability of natural harbours and port facilities for transporting goods etc..
v) Technological environment:
 The development in the IT and telecommunications has created a global market.
 Technology is widely used in conducting market research for understanding the special needs of the
customer.
vi) Global environment:
 With the rapid growth of technology the physical boundaries are fast disappearing and the new global
market is emerging.
 The international environmental factors which affects a business

2. Describe the economic and socio cultural environment of business.

i) Economic environment:
The business is an integral part of the economic system prevalent in a nation. The multiple variables in the
macro environment system which has a bearing on a business include
 The nature of economy based on the stage of development. The countries across the globe can be
categorised on the basis of growth and per capita income as developed nations, developing nations and
underdeveloped nations.
 The nature of economic system The economic systems can be classified as Capitalistic, Socialistic and
Mixed economy.
 The economic policies of a nation Monetary policy, fiscal policy, Export-import policy,Industrial policy
Trade policy, Foreign exchange policy etc are part of the economic environment.
 Development of financial market The organisation and development of money market, capital market
securities market and, the banking system has a greater impact.
ii) Socio-Cultural environment :
Business is a part of the society .Social environment refers to the sum total of factors of the society in which
the business is located. Social and cultural environment of society affects the business.
The socio-cultural environment also includes the following;
1) The social institutions and groups
2) Family structure prevalent in the society
3) Role of marriage as an institution
4) Caste system in the society
5) Customs,beliefs and values
6) Demographic factors which includes the size, composition, literacy level,distribution and mobility of the
population
7) The lifestyle of people and their tastes,likes and preferences.

3. Explain the micro environmental factors of business.

This refers to those factors which are in the immediate environment of a business affecting its performance.
These include the following:
i) Suppliers:
 In any organisation the suppliers of raw materials and other inputs play a very vital role.
 Organisations have realised the importance of nurturing and maintaining good relationship with the
suppliers.

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PGT Commerce
 www.nammakalvi.in
70
ii) Customers:
 The aim of any business is to satisfy the needs of its customers. The customer is the king business.
 Customer relationship management aims at creating and sustaining cordial relations with customers.
iii) Competitors:
 All organisations face competition at all levels local, national and global.
 Competitors may be for the same product or for similar products.
 It is important for a business to understand its competitors and modify their business strategies in the
face of competition.
iv) Marketing Channel members:
 The marketing inter-mediaries serve as a connecting link between the business and its customers.
 Market research agencies help the firm to understand the needs of the customers
v) Public:
 This refers to any group like media group, citizen action group and local public which has an impact on
the business.
 The public group has the ability to make or mar a business. Many companies had to face closure due to
actions by local public.

4. Discuss the significance of understanding business environment and the internal factors affecting business.
The significance of understanding the business environment is as follows:
 Helps in formulating Strategy and future planning
 The analysis of business environment helps a business to identify new opportunities
 It helps the firms to identify threats which may affect the business. Thus measures can be taken by the
firm to overcome the threats.
 It helps business in taking steps to cope with the rapid changes
 Environmental analysis helps a business to enhance its image by being sensitive and quickly responding to
the changing environment.
The major internal factors affecting business decisions are:
Vision and objectives:
 The vision and objectives of a business guides its operations and strategic decisions.
Management structure:
 The structure of management/board and their style of functioning, the level of professionalism of
management, and the composition of the board are the various factors which affects the decision
making.
Company image:
 The image of an organisation plays an important role in introducing new products, expanding and
entering new markets both domestic and international, raising finance etc.

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Chapter 19 - One Mark:
1. VUCA stands for VOLATILITY, UNCERTAINTY, COMPLEXITY, AMBIGUIDY
2. GST stands for GOODS AND SERVICES TAX
3. Factors within an organization constitutes INTERNAL environment.
4. Macro Environment of business is an UNCONTROLLABLE factor.
5. The two major types of business environment are INTERNAL and EXTERNAL.
6. GEO PHYSICAL environment includes weather and climatic conditions.
7. The size and composition of the population is part of SOCIAL CULTURAL environment.

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PGT Commerce
CHAPTER 20: LIBERALIZATION, PRIVATISATION, AND GLOBALIZATION
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I. Very Short Answer Questions:
1. State the branches of New Economic Policy.
There are three dimensions of New Economic Policy
 Liberalization, Privatisation, And Globalization
2. What is Privatisation?
Privatization is the incidence or process of transferring ownership of a business enterprise, agency or
public service from the government to the private sector.
3. Mention any three disadvantages of Liberalisation.
(a) Increase in unemployment
(b) Loss to domestic units
(c) Increased dependence on foreign nations
(d) Unbalanced development
4. Name the industries which are reserved for public sector.
Currently only Atomic Energy, Defence and Railways are Government monopoly industries i.e., Public
sector industries in the country.
5. Give any three advantages of Globalisation.
(a) Increase in foreign collaboration
(b) Expansion of market
(c) Technological development
(d) Reduction in brain drain
II. Short Answer Questions:
1. What do you mean by Liberalisation?
 Liberalization refers to laws or rules being liberalized, or relaxed, by a government.
 Liberalization means relaxation of various government restrictions in the areas of social and economic
policies in order to make economies free to enter in the market and establish their venture in the
country.
2. Explain the concept of Privatisation.
 Privatisation means permitting the private sector to set up industries which were previously reserved for
the public sector.
 The main reason for privatisation was that PSUs were running in losses due to mismanagement and
political interference. The managers could not work independently and the production capacity remained
under-utilized.
3. What are advantages of disinvestment?
The Govt. has started the process of disinvestment in those PSUs which had been running into loss. It means that
Govt. has been selling out these industries to private sector.
Advantages:
 The government can focus more on core activities such as infrastructure, defence, education etc..
 Brings about greater efficiencies for the economy and markets as a whole
 Greater opportunities and avenues for career growth- further employment generation

4. State any three impacts on Globalisation.

(a) Corporations got a competitive advantage from lower operating costs, and access to new raw
materials and additional markets.
(b)Multinational corporations (MNCs) can manufacture, buy and sell goods worldwide.
(c)Globalisation has led to a boom in consumer products market.

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PGT Commerce
5. Write a short note on New Economic Policy.
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 India agreed to the conditions of World Bank and IMF and announced New Economic Policy (NEP)
which consists of wide range of economic reforms.
 This new set of economic reforms is commonly known as the LPG or Liberalisation, Privatisation
and Globalisation model.

Liberalization refers to laws or rules being liberalized, or relaxed, by a government.

Privatisation means permitting the private sector to set up industries which were previously reserved for the
public sector.
Globalisation means the interaction and integration of the domestic economy with the rest of the world with
regard to foreign investment, trade, production and financial matters.

III. Long Answer Questions:

1. Explain the advantages and disadvantages of liberalisation.

Liberalization means relaxation of various government restrictions in the areas of social and economic policies in
order to make economies free to enter in the market and establish their venture in the country
Advantages:
(a) Increase in foreign investment:
 If a country liberalises its trade, it will make the country more attractive for inward investment.
(b)Increase the foreign exchange reserve:
 Relaxation in the regulations covering foreign investment and foreign exchange has paved way for easy
access to foreign capital.
(c)Increase in consumption:
 Liberalization increases the number of goods available for consumption within a country due to increase
in production.
(d)Control over price:
 The removal of tariff barriers can lead to lower prices for consumers. This would be particularly a benefit
for countries who are importers.
Disadvantages:
(a)Increase in unemployment:
 Trade liberalisation often leads to a shift in the balance of an economy. Some industries grow, some
decline. Therefore, there may often be structural unemployment from certain industries closing.
(b)Loss to domestic units:
 With fewer entry restrictions, it has been possible for many entrants to make inroads into the country,
which poses a threat and competition to the existing domestic units.
(c)Increased dependence on foreign nations:
 Trade liberalisation means firms will face greater competition from abroad.
(d)Unbalanced development:
 Trade liberalisation may be damaging for developing economies, The trade liberalisation often benefits
developed countries rather than developing economies.

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2. Explain the impact of LPG on Indian Economy.
Impact of Liberalization:
 Liberalization has opened up new business opportunities abroad and increased foreign direct investment.
 It became very easy to obtain loans from banks for business expansion.
 "Foreign Collaboration" is the latest outcome of liberalization.
 A number of multinational companies started operating world-wide including India.
Impact of Privatization
 Privatization has a positive impact on the financial growth by decreasing the deficits and debts.
 Increase in the efficiency of government undertakings.
 Provide better goods and services to the consumers.
 Making way for Foreign Direct Investment (FDI)
Impact of Globalization
 Corporations got a competitive advantage from lower operating costs, and access to new raw materials
and additional markets.
 Multinational corporations (MNCs) can manufacture, buy and sell goods worldwide.
 Globalization has led to a boom in consumer products market.
 The advent of foreign companies and growth in economy has led to job creation.

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D.Chithambararaj
PGT Commerce